Date: 2019-05-17
An appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act R.S.O. 1990, c. O.31 to Disallow a Claim
Between:
Ottawa Carleton Standard Condo Corp. 669
Appellant
and
Tarion Warranty Corporation
Respondent
and
Claridge Homes (Crown Pointe) Inc.
Added Party
DECISION AND ORDER
ADJUDICATOR: Marisa Victor, Member
APPEARANCES:
For the Appellant: Christy Allen, Counsel
David Lu, associate Counsel
For the Respondent: Andrew McKenna, Counsel
For the Added Party: Helmut Brodmann, Counsel
Heard in Ottawa on: September 25, 26, 29, October 2, 3, 6, 10, 11, 12, 13 2017,
October 9, 10, 11, 12, 15, 16, 17, 24, 25, 29, 31 2018
OVERVIEW... 6
RESULT. 7
PRELIMINARY AND INTERLOCUTORY ISSUES.. 8
a. Motion to admit the reports of the engineering company, Morrison Hershfield. 8
Submissions. 9
Analysis. 9
b. Motion for Additional Disclosure - Mid-hearing motion. 10
Submissions. 10
Analysis. 11
c. Objection regarding proper reply - at end of hearing. 11
Submissions. 11
Analysis. 11
ISSUES 12
LAW 12
a. The Applicable Statutory Warranty. 12
b. Compensation for Breach of Warranty. 13
c. The Common Element Warranty Claim... 13
d. Tribunal Powers on Appeal 14
BACKGROUND FACTS.. 14
a. Engineers retained by the Strand. 14
b. Tarion involvement 15
c. Claridge Involvement 15
EVIDENCE AND ANALYSIS.. 16
a. Building Envelope. 16
i. Item 6 (EC8): Cold walls in suites. 16
Is the item warrantable?. 16
Did Claridge fall below the standard of construction at the time?. 16
Evidence. 16
Analysis. 19
ii. Item 7 & 8 (W1 and W2): Lack of details in window drawings. 19
Is the item warrantable?. 20
Evidence. 20
Analysis. 21
iii. Item 11 & 12 (W8 and W9): Condensation on windows and doors. 21
Is the Item Warrantable?. 22
Evidence. 22
Analysis. 23
Did Claridge fall below the standard of construction at the time?. 24
Appellant’s Evidence. 24
Tarion’s Evidence. 26
Claridge’s Evidence. 27
Analysis. 28
What is the amount of compensation due?. 29
Submissions. 29
Analysis. 30
iv. Item 13 & 14 (W10 and W11) – air leakage around sliding doors and windows. 32
Is the Item Warrantable?. 32
Did Claridge fall below the standard of construction at the time?. 32
Evidence. 32
Analysis. 34
b. Item 19 (M13) Dual-Temperature Pipes. 34
Is the Item Warrantable?. 35
Did Claridge fall below the standard of construction at the time?. 35
Appellant’s Evidence. 35
Tarion’s Evidence. 39
Claridge’s Evidence. 42
What is the amount of compensation due?. 47
Appellant’s Submissions. 47
Tarion’s Submissions. 48
Claridge’s Submissions. 49
Analysis. 49
c. Delay in Making Claim... 52
Submissions. 52
Analysis. 53
ORDER 53
OVERVIEW
1This case had a long and winding road leading to this appeal before the Licence Appeal Tribunal (the Tribunal or the LAT). The appellant, the Ottawa Carleton Standard Condo Corp. 669 (the Strand), is a condominium corporation. The condominium is a 179 unit, 14-storey building located in Ottawa (the Building). The Building was built by the added party, Claridge Homes (Crown Pointe) Inc. (the Builder, or Claridge) and completed, or declared, on November 3, 2003.
2Within the first year of the declaration of the Building, the Strand retained an engineering company to conduct an audit as required by law. The engineering company issued the first-year performance audit report (the PA) which listed numerous defects with the Building. The PA, received by the respondent Tarion Warranty Corporation (Tarion) on October 26, 2004, initiated the claim. Overtime many of the issues raised in the PA were resolved. By 2009, Tarion had issued three warranty assessment reports (WARs) denying coverage for a number of items claimed including most of those in the current appeal.
3In 2009, after Tarion had issued its last WAR, the Strand ceased communication with Tarion. The Strand did not request a decision letter and Tarion did not produce one.
4In 2015, five and a half years later, the Strand contacted Tarion and advised that there were previously claimed defects that remained unresolved. It requested that Tarion either conciliate the outstanding defects or issue a decision letter under s. 14 (3) of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the Act).
5These claims were denied by Tarion in its warranty decision letter on August 17, 2015 (the Decision). The appellant then appealed the Decision to the LAT on September 4, 2015. Of the twenty items denied in the Decision, only eight items are appealed.
6The remaining eight claims all fall into two main areas of concern - the building envelope or the dual-temperature piping system that is part of the heating and cooling system.
7The hearing of this matter began on September 25, 2017 and lasted for ten days until October 13, 2017. Twelve further days of the hearing were scheduled to take place in March and April 2018, to allow for repairs to the building and to obtain expert evidence on the cost of repairs. Those dates were vacated on consent due to construction delays and to allow the parties adequate time to prepare and respond to numerous expert reports. The hearing of this matter then resumed in October 2018 for a final eleven days. It was completed on October 31, 2018 with an additional few days allowed for written reply submissions on one issue.
RESULT
8I find the following:
a. On the issue of the building envelope:1
i. Item 6 (EC8) – cold walls in suites: This item is not warranted.
ii. Item 7 & 8 (W1 and W2) – lack of detail in window drawings: This item is not warranted.
iii. Item 11 & 12 (W8 and W9) – condensation on windows and patio doors: The excess condensation caused by substandard and/or missing insulation and failure to incorporate the thermal break is warranted under the Act. Compensation is due in the amount of $166,000 plus HST.
iv. Item 13 & 14 (W10 and W11) – air leakage around sliding doors and windows: This item is not warranted.
b. On the claim of item 19 (M13), deficient insulation of the dual-temperature pipe system:
i. The insulation of the pipes was not done in a workmanlike manner and fell below the standard of construction at the time, therefore it is warranted under the Act. Compensation is due in the amount of $906,285 plus HST.
c. The delay in bringing this claim before the LAT does not result in coverage being denied.
PRELIMINARY AND INTERLOCUTORY ISSUES
9Throughout the course of the hearing, the following preliminary and interlocutory decisions were made:
a. Motion to admit the reports of the engineering company, Morrison Hershfield;
b. Motion for additional disclosure - mid-hearing motion; and
c. Objection regarding proper reply - at the end of the hearing.
a. Motion to admit the reports of the engineering company, Morrison Hershfield
10On the first day of the hearing, the appellant made it clear it planned to introduce reports prepared by Morrison Hershfield (MH), an engineering company, for the truth of their contents. In addition, the appellant planned to call just one witness, Mr. David Kayll, an engineer with MH who authored some of the reports, to speak to all of the MH reports.
Submissions
11The appellant stated that a principled exception to the hearsay rule applies to the documents not authored by Mr. Kayll.
12Tarion opposed the admissibility of the documents. Tarion stated they could be admitted for authenticity, but witnesses were needed to speak to the contents. As they are expert reports they cannot be submitted as business records. Tarion was concerned that allowing Mr. Kayll to speak to all the MH reports, even those not authored by him, would deny Tarion the opportunity to cross-examine the expert who drafted the report. Tarion stated it was unfair to have these documents accepted for the truth of their contents and unfair not to call the authors to testify given the complexity of the case.
13Claridge supported Tarion’s position.
Analysis
14I allowed the MH documents and reports to be admitted as evidence. The decision was made pursuant to s. 15 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 (the SPPA), which authorizes hearsay evidence in administrative proceedings. There was no denial of natural justice by having one MH representative, Mr. Kayll, testify in regard to all the MH reports, even those he did not author.
15The qualifiers to s. 15 are that the documents must be relevant, not unduly repetitious, not covered by privilege and that there be no denial of natural justice. In this case, the documents appeared highly relevant and were disclosed well in advance of the hearing. There were no concerns regarding notice. I therefore found that there was no denial of natural justice such that the documents should be rendered inadmissible. The issues raised by the respondents in moving to exclude the reports could go to weight.
b. Motion for Additional Disclosure - Mid-hearing motion
16On October 10, 2017, seven days into the hearing, the appellant made a motion under r. 6.8(d) of the Tribunal’s Rules of Practice for further disclosure of documentation by Tarion. The requested documents included copies of notes, memos and internal communications with Claridge relating to the claims under appeal.
Submissions
17The motion was made after the appellant discovered that not all documents in Tarion’s possession had been disclosed. The appellant argued that it is entitled to know if there was a basis for a denial other than what was in Tarion’s WARs. The appellant further argued that due to the high potential value of this claim, proportionality favours the disclosure of further documentation and that outweighs any prejudice.
18Tarion opposed the motion. It did so on the basis that it complied with the requirement to disclose all documents it intended to rely on (r. 6.3). It also opposed the motion on the basis that the timing was late in the proceeding as it was seven days into the hearing and was only related to questions arising on cross-examination. In addition, it stated the request was vague and over-broad.
Analysis
19While the LAT has the power under the SPPA and its Rules of Practice to order further disclosure, I declined to do so on the basis of relevance and proportionality.
20I was not satisfied the documents as defined were relevant for the hearing. The issues are whether the deficiencies are warranted under the Act. The Tribunal owes no deference to Tarion’s decision or to Tarion’s decision-making process.
21There was no specific request for a relevant missing document. The request was overbroad.
c. Objection regarding proper reply - at end of hearing
22On the last day of the hearing, October 31, 2018, during submissions, the appellant used its reply to respond to Tarion’s submission that the delay in bringing the claim should be a complete bar to compensation.
Submissions
23Tarion objected to the appellant’s use of reply on the basis that those submissions should have been made in chief as the appellant had advance notice of the argument Tarion would be making.
Analysis
24I allowed the appellant to address the argument in reply given the over-riding consideration of fairness at the Tribunal.
25I also allowed Tarion a further week to provide no more than five pages of written submission to respond to the appellant’s reply submissions on that one issue.
ISSUES
26The issues are whether the appellant’s claims are warranted under the Act, and if so, what compensation is owed.
27The following claims are in dispute:
a. Building envelope:
i. Item 6 (EC8) – cold walls in suites
ii. Item 7 & 8 (W1 and W2) – lack of detail in window drawings
iii. Item 11 & 12 (W8 and W9) – condensation on windows and doors
iv. Item 13 & 14 (W10 and W11) – air leakage around sliding doors and windows
b. Dual-Temperature Pipes:
i. Item 19 (M13) – pipe insulation – condensation on pipes
28In order to decide each claim, I must answer the following questions:
Is the item warrantable?
Did Claridge fall below the standard of construction applicable at the time?
What is the amount of compensation due?
29In relation to all claims I must also answer the following novel question:
- Even if the appellant proves its claims, due to the length in delay in bringing this claim, should compensation be denied?
LAW
a. The Applicable Statutory Warranty
30Section 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 (the Code). Under s. 13(4) of the Act, the warranties apply for a one-year period unless otherwise prescribed.
b. Compensation for Breach of Warranty
31Section 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.
c. The Common Element Warranty Claim
32Under s. 15(a) of the Act, the condominium corporation is deemed to be 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).
33Common element warranty claims are subject to both the Act and the Condominium Act, 1998, S.O. 1998, c. 19.
34Section 44 of the Condominium Act requires the board of directors of a residential condominium to retain a professional engineer or architect to conduct an audit of the common elements to determine whether there are any deficiencies in the common elements after construction has been completed that may give rise to a claim under the Act. The engineer or architect conducting the audit shall inspect the major components of the building and conduct a survey of owners. The PA shall be prepared that includes details of the inspection and findings made, and a determination of whether there are any deficiencies in the common elements that may give rise to a claim under the Act. The PA must be submitted to the board and filed with Tarion before the end of the 11th month following Registration of the building.
35Under ss. 44(10) of the Act, the filing of the PA with Tarion shall be deemed to constitute a notice of claim for the deficiencies disclosed within.
d. Tribunal Powers on Appeal
36Where Tarion makes a decision under s. 14 of the Act, the owner may appeal the decision to the Tribunal under ss. 16(2).
37The Act is consumer protection legislation and should be given a broad and liberal interpretation. The onus is on the appellant to prove, on a balance of probabilities that the defects in the common elements constitute a breach of the warranty that damages have resulted from the breach and the amount of those damages. The Tribunal owes no deference to Tarion’s decision.
38Following 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.
BACKGROUND FACTS
a. Engineers retained by the Strand
39In 2004, the Strand retained MH to complete the required audit. On October 25, 2004, MH produced the PA upon which the Strand’s current claims are based.
40MH engineers, including David Kayll and Dan McDonald, were retained to investigate the initial 150 defects listed in the PA. Included in those claims were the eight items under appeal. Between 2004 and 2011, MH produced a number of experts’ reports on both the issue of the building envelope and the issue of the dual-temperature pipe system. David Kayll testified at the hearing.
41The Strand then retained Keller Engineering (Keller) to continue investigating the outstanding claims, including those under appeal. James Dahmer and Justin Tudor testified regarding their reports dating from 2011 to 2017.
42In 2017, the Strand retained Ryan Leonard of Goodkey, Weedmark & Associates Ltd. (Goodkey) to investigate and report on the items under appeal and provide cost estimates for their repair. He also testified.
b. Tarion involvement
43The Strand was in regular contact with Tarion regarding outstanding items from the PA from 2004 until 2009. During that time, Tarion conducted a common elements meeting and several conciliations. Many of the items in the PA were resolved. However, from 2008 to 2009 Tarion issued three WARs covering most of the items under appeal. The WARs denied warranty coverage.
c. Claridge Involvement
44In 2004, Claridge was contacted by the Strand regarding the items in the PA. Claridge did resolve some of the items over time. There were, however, times when the appellant contacted Claridge and no response was received for months at a time even though repeated attempts were made.
45In February 2008, the Strand wrote to Tarion to request a common elements meeting, stating that its relationship with Claridge had broken down.
46On March 23, 2009, the Strand filed a Statement of Claim against Claridge. This action was ultimately not productive as the case was dismissed on consent of all parties on January 13, 2016.
EVIDENCE AND ANALYSIS
a. Building Envelope
47The following claims fall into the building envelope category:
Item 6 (EC8) – cold walls in suites
Item 7 & 8 (W1 and W2) – no details regarding connection of air to windows
Item 11 & 12 (W8 and W9) – condensation on windows and doors
Item 13 & 14 (W10 and W11) – air leakage around sliding doors and windows
48I will deal with each item in turn.
i. Item 6 (EC8): Cold walls in suites
49As part of the audit conducted by MH, an owner’s survey was completed. The survey contained complaints that cold exterior walls and drafts could be felt in units 607 and 703. The complaint regarding unit 703 was withdrawn. Only the complaint in relation to suite 607 remained unresolved.
Is the item warrantable?
50There was no dispute that a deficiency causing cold walls could be covered by the warranty.
Did Claridge fall below the standard of construction at the time?
Evidence
51Dorothy Church testified for the Strand. She was the senior condominium manager through her employment with the Condo Management Group that provided services to the Strand. She stated that as of February 6, 2007, there had been no investigation by MH or any other expert as to why the walls in unit 607 were cold. She was unable to advise of any further investigation of the cold walls. She stated that access had been given to any unit on request if notice was provided.
52MH completed several investigations into the building envelope. On July 9, 2007, MH wrote to the Strand to advise of existing wall conditions as found in unit 411. As a result of openings made in the walls, they found incomplete insulation and recommended replacing the vapour barrier and insulation in the unit. The letter from MH does not provide any commentary regarding cold walls in unit 607 or in the rest of the building.
53In 2008, MH conducted exploratory wall openings in seven units to investigate window and door condensation issues. These investigations found a lack of Tyvek, a polyethylene product used as a house wrap, within the exterior wall assembly. MH suggested the lack of Tyvek, which acts as an air barrier, was allowing cold air to reach within the stud cavity and cool the windows contributing to the condensation problem. The report itself did not comment on whether the deficiency was leading to cold walls.
54In 2009, MH produced a report based on a suite-by-suite survey conducted for the purpose of identifying the prevalence of condensation and/or ice buildup and cold walls. They entered every unit and took temperature and relative humidity measurements. For suite 607 the survey notes wall temperatures around windows to be between 15°C and 20°C when the outside temperature was -26°C and indoor temperature was 22°C. The report concluded that interior surface temperatures of the exterior walls ranged from 9°C to 20°C. The report commented on wall construction, again referring to the lack of Tyvek found in the previous investigation. The report recommended five tasks to be completed in order, going from most cost effective to most expensive. The report noted that task five, the only task that involved improving air tightness of exterior walls, might not be necessary. It also stated that tasks four and five exceeded the original design approach but may be necessary to achieve original design intent.
55Mr. Kayll testified that he did not know whether MH was ever asked to go back and examine cold walls in either suites 607 or 703. He stated the issue of cold walls links with the condensation issues. He agreed on cross-examination that MH’s focus was on excess condensation and not cold walls.
56Keller measured wall temperatures in April 2012, however it did not include unit 607 in its study. That report was focused on causes of condensation and made no particular comment on wall assembly deficiencies that could be causing cold walls.
57Mr. Tudor of Keller Engineering testified that the repairs suggested to reinsulate the windows and patio doors would have little impact on cold walls. Keller had conducted some test repairs on the windows and patio doors. The wall temperature measurements remained relatively stable after the repairs were completed.
58Robert Fisher, a warranty services representative, testified for Tarion. He stated that a claim for cold walls would require the appellant to open up the wall to provide evidence of a missing or inadequate interior climate control measures. In rejecting the claim, Mr. Fisher testified that Tarion had not been given access to unit 607 and had not been provided evidence of a defect.
59Don Buchan, engineer and head of Buchan, Lawton, Parent Ltd., was retained by Tarion as an expert. In his opinion, the cold wall temperatures in unit 607, recorded by MH in the 2009 suite-by-suite survey, would not be considered unusually cold considering the outside temperature at the time.
Analysis
60The evidence submitted related to this item does not support evidence of cold walls or a defect in the construction of the walls in unit 607 or in the rest of the Building. In order to be successful, the appellant must show evidence that a building deficiency exists such that the construction of the walls was not completed in a workmanlike manner, or the existence of a defect in violation of the Code.
61In particular, the expert evidence of MH and Keller and the investigations they conducted were not focused on establishing evidence for cold walls or determining the cause of any cold wall deficiencies. Even though MH recorded a wall temperature measure for unit 607, no expert opinion was given that those measurements represented a cold wall that falls below expected norms. The 2009 MH report recommending five tasks also indicated that repairs to the building envelope, task five, might not be necessary if the other four tasks were completed, and also exceeded the original design approach.
62Mr. Buchan provided an expert opinion that the temperature recorded in the suite-by-suite survey in 2009 provided a wall temperature recording for unit 607 that was within expected ranges. There was no evidence to dispute his opinion.
63I find that the appellant has failed to prove that there is a common element deficiency in the wall assembly in unit 607 or anywhere else in the Building causing cold walls. As such this item is not warranted.
ii. Item 7 & 8 (W1 and W2): Lack of details in window drawings
64These two items are interlinked and therefore grouped together. Item 7 provides that no details were provided that clearly indicate the method of connecting the air and weather barriers to the window. Item 8 provides that no details were provided detailing window anchorage.
65The PA states that the architectural drawings and window shop drawings do not clearly illustrate the method of connecting the air and weather barriers to the window assembly. In particular, they found that anchorage details were lacking.
Is the item warrantable?
Evidence
66The parties disagree as to whether this item is warrantable.
67The appellant has the onus to show that this item is warrantable under the Act. The Strand submits that the Act is consumer legislation and should therefore be given a broad and liberal interpretation. The Strand has grouped this claim within the building envelope complaints. The rationale is that the lack of these drawings contributed to the defective installment of windows (Items 11 & 12) leading to condensation problems.
68Tarion takes that position that the failure to provide drawings is beyond the scope of warranty coverage. Mr. Buchan, the expert for Tarion, further states that in his opinion, while these drawings are useful, they are not often provided as part of the document turnover. Tarion further states that even if the contract between the appellant and the added party required the turnover of the drawings, issues of design or contract are remedied by way of civil court. Tarion states the warranty only covers issues of workmanship that cause damages.
69Tarion relies on several past decisions of the Tribunal that hold that there is a distinction between design and workmanship and that the provision of the shop drawings is an issue of design.
70The construction performance guidelines, December 1, 2003 (the Guidelines) were admitted as evidence in the hearing. The Guidelines are used by Tarion to determine if a condition is covered by the warranty. The version submitted as evidence was the version in place at the time of the construction of the Building. It makes no reference to the provision of shop or architectural drawings, nor does it state that a lack of detailing in the drawings is a defect.
Analysis
71I find that this item does not constitute a breach of warranty under the Act because it is not covered by the warranty.
72This item does not form part of the home or its materials and as a matter of common sense does not fall under s. 13 of the Act. Though these drawings are no doubt useful, they are not covered by the warranty program.
73The appellant has failed to satisfy the onus of proving that this item is covered by the warranty.
iii. Item 11 & 12 (W8 and W9): Condensation on windows and doors
74These two items are interlinked and therefore grouped together. Item 11 states that there is a problem with window condensation and ice accumulation. Item 12 is the same complaint but with regard to sliding patio door condensation and ice accumulation.
Is the Item Warrantable?
Evidence
75The Strand takes the position that excessive condensation is a defect that is warrantable. The Strand points to the decisions in Haider2 for the proposition that the Tribunal may find an issue not normally considered a defect to be warranted, and further, that an appellant need only prove the existence of a defect and not the cause. In the Haider case, the issue was excessive efflorescence on the exterior of bricks, a naturally-occurring white substance which usually dissipates within two years. In that case it was still present four and half years later. Here, the appellant states that the issue of excess condensation was reported within the warranty period and ought to be warranted under the Act where it is unusual or unacceptable even if the cause is undetermined.
76Tarion states that condensation on windows is not itself a warrantable item. It states that the Guidelines support this at section 8.5 where it states that there is no warranty for condensation.
77In the alternative, the Strand argues that the claim for condensation is a reporting of a symptom of an underlying deficiency, that being defective perimeter insulation of the windows. There is no dispute that defective insulation could be covered by the warranty.
Analysis
78I find that the claim of excess condensation can be a deficiency covered by the warranty program in certain situations. I base this decision on principles of statutory interpretation, the legislation, and the decisions in Haider.
79Section 13 of the Act provides the legislative basis for the warranty coverage and includes that a home shall be constructed in a workmanlike manner and be free of defects in material. Further, the home construction shall also comply with the Code. Subsection 13(2) specifies several exclusions. In this list of exclusions is item (e) – “damage caused by dampness or condensation due to failure by the owner to maintain adequate ventilation.” If an item meets the criteria under ss. 13(1) and is not excluded by ss. 13(2), it can be covered by the warranty. In this case, the provisions of s. 13, read together, suggest that the legislature intended that damage caused by condensation is covered if it is not due to the owner’s failure to maintain adequate ventilation.
80The applicable version of the Code3 states at section 5.3.1.2 that windows are required to minimize surface condensation and installation of windows shall incorporate a thermal break. This implies that installation of a window that does not minimize condensation is a Code violation. Therefore, windows and window installations that do not minimize surface condensation fail to comply with the Code, and are warrantable under s. 13 of the Act.
81I find that it is possible to have a warrantable claim for condensation as long as the condensation is not due to the owner maintaining inadequate ventilation, and the condensation exceeds what is normally expected in the circumstances.
82In the alternative argument put forward by the appellant, it was not disputed that deficient insulation could be covered by the warranty.
Did Claridge fall below the standard of construction at the time?
Appellant’s Evidence
83A significant portion of the hearing was focused on the description and mechanics of condensation, including a homeowner’s lifestyle and the relative humidity (RH) in any given unit as contributing factors to condensation.
84The experts generally agreed that several factors can affect condensation: fresh air and circulation of air, the undercut of the doorways, running exhaust fans, use of dryers or showers, window coverings, the number of people living in a unit, and stack effect on taller buildings.
85There was disagreement among the experts as to the appropriate level of indoor RH in order to determine if the level of condensation on the windows was abnormal. Suggested appropriate indoor RH ranged from 20% to 35%. The RH value affects the capacity of air to hold moisture: the lower the RH, the less likely it is that condensation on windows will occur.
86MH stated in its 2006 reports that 35% RH was the level they used for their analysis. Mr. Kayll testified that 35% RH was used because it was a comfortable level during winter months.
87Mr. Kayll’s November 2008 reports for MH, however, used a standard of 30% RH. In the report he suggested that 30% RH should be a target for unit owners as the MH investigations had shown less condensation at that RH level during winter months. He testified that in his opinion 30% RH was a bit high when cold outside, but at the time it was considered a low RH level in an occupied suite. He agreed that there was no standard RH level set in the Code.
88In Mr. Kayll’s November 2008 report, he also suggested other strategies to reduce condensation including: review indoor air pressure to ensure corridors had a positive pressure compared to individual suites to improve fresh air delivery (fresh air in the winter would reduce indoor RH levels); review door seals to ensure consistent air flow into suites; review exhaust fans which could remove humid air following cooking or showers; and then review the tightness of the building envelope. He recommended a budget of $750 to $1000 per door or window opening and suggested an overall budget of $125,000 would address the most problematic windows and patio doors. In testimony, Mr. Kayll stated those amounts were ball park suggestions.
89In cross examination, Mr. Kayll agreed that reducing RH to 20% would further reduce the risk of condensation.
90Expert reports from MH and Keller recorded the following:
PA – 33% of respondents indicated condensation and/or frosting on windows, 35% of respondents indicated condensation and/or frosting on patio doors;4
March 14, 2006 MH report: windows in suite 411 not performing as expected;
March 11, 2008 MH report: reported ice and condensation from 45 unit-owners, investigations ongoing;
March 14, 2006 MH report: states winter design indoor RH for residential occupancy is 35% at an indoor temperature of 20°C.
April 7, 2008 MH report: seven exploratory openings made, some thermal breaks in windows not properly insulated;
November 20, 2008 MH Report: advised that target indoor humidity of 30% RH in cold weather should be the goal;
February 2009 MH suite-by-suite survey: condensation or ice buildup found in 85% of units with comments noting if condensation or ice was on outer panes;
February 18, 2010 MH report: confirmed condensation and recommended reviewing the adequacy of the air barrier around windows and patio doors where RH was at 20% or less, ventilation is adequate, and condensation is still occurring;
April 11, 2016 Keller report: test repairs were done on three units to observe wall assemblies and found missing and incomplete insulation and issues concerning the location of the window’s thermal break, all aspects that could contribute to window condensation; and
July 31, 2017 Keller report: investigation involving four exploratory openings describing problematic insulation, different composition of insulation (batt and spray foam) and inconsistent location of thermal break.
Tarion’s Evidence
91Mr. Buchan testified that with an RH level of 20%, together with adequate ventilation, if condensation is an issue then the next steps can be taken with regard to the building envelope. He critiqued the MH expert reports, stating there was no continuum in the way the investigations progressed. He stated that sample sizes for investigations were too small to extrapolate from. In his opinion, the suite-by-suite survey lacked qualitative information, and monitoring was done on three days instead of continually for a month or more to obtain long-term monitoring measures.
92Mr. Buchan also critiqued the Keller test repairs. He stated that they were marginally successful and therefore did not provide evidence that re-insulation of all the windows and doors would improve condensation levels in the Building.
93Mr. Buchan did agree, however, that where a thermal break is exposed, due to lack of or improper insulation, it was a deficiency.
Claridge’s Evidence
94Mr. Fortin was called as an expert by Claridge. He is a mechanical engineer who has spent his entire career in the window industry. He was qualified as an expert in curtain wall, windows and glazing and had conducted around 100 investigations, including five to ten in high-rise condominium buildings such as the one at issue in this appeal. His expertise was not challenged by any of the other parties.
95Mr. Fortin testified that in his opinion the Code required minimization of condensation and that windows and patio doors need to have a thermal break. Mr. Fortin testified that the windows used in this building met the minimum standards in the Code, however, they were of low-end quality, which he stated was typical for residential high-rise construction. Mr. Fortin explained that while condensation was a natural and even expected occurrence, the condensation to be concerned about was condensation inside the window system that can damage drywall and/or develop mold. In Mr. Fortin’s opinion, an RH of approximately 20% or less is needed in colder weather in order to minimize condensation.
96Mr. Fortin focused on the suite-by-suite survey measurements taken by MH in 2009 and referred to in the Keller report of April 11, 2016. Mr. Fortin discounted any suite where there was an additional comment stating frost or condensation was on the outside of the window or door. This type of condensation, in his view, was not problematic or damaging. In his opinion, after disregarding those suites, as well as any suite where RH was above 20%, there were only four units with problematic condensation. These had RH values of around 20% and still had interior condensation. In cross-examination he agreed with the appellant’s experts that this was a discrepancy in how those windows were insulated. He agreed there could be missing insulation, deficiencies with spray foam insulation and/or failure to incorporate a thermal break.
97Mr. Fortin also agreed, under cross-examination, that thermal breaks should be insulated. When shown photos of some of the test openings, he agreed that had he been reviewing the Building during construction, he would have required the insulation and placement of the thermal break to be corrected.
98Mr. Fortin also stated that the purpose of minimizing condensation in workmanship, and indeed as required by the Code, is to reduce water damage on drywall and prevent mold.
Analysis
99I find that the expert evidence establishes on a balance of probabilities that the excess condensation on the windows and patio doors in the Building is a breach of the warranty under the Act. In addition, I find that windows with missing insulation and windows where the thermal break is exposed, due to lack of or improper insulation, is a breach of the warranty under the Act.
100Despite the disagreement among the experts as to the correct level of RH for testing of windows and patio doors, the most compelling evidence came from Mr. Fortin, the window expert retained by Claridge. Mr. Fortin’s testimony, agreeing that at least four units had problems with their windows based on the suite-by-suite survey, agreeing that thermal breaks need to be insulated and that the purpose of minimizing condensation is to reduce drywall damage and prevent mold, is powerful evidence. Mr. Fortin was called as an expert for Claridge, who was adverse in position to the appellant.
101Mr. Fortin stated, though, that four units with problematic insulation did not mean there was a problem throughout the Building. I disagree. Excess condensation on the windows and patio doors was a complaint flagged in the PA done within the first year. Other strategies were explored, including balancing the HVAC system, conducting test repairs, examining the exhaust fans etc. The test openings revealed deficient insulation around some windows and doors. These included incomplete insulation, spray foam that was not fully cured and thermal breaks not insulated. Those discoveries, together with the history of complaints and Mr. Fortin’s agreement that at least four units had problematic insulation, are significant.
102The appellants are not required to show that the problem exists in every unit or even in most units, they are required to show that it is a common element issue that is warranted. The condensation levels on windows and patio doors in at least those four units in the Building are excessive and are not excluded by ss. 13(2) of the Act because they cannot be attributed to lack of ventilation. In addition, the test openings show some windows lack continuous insulation and a failure to insulate the thermal break, both of which can cause excess condensation. Based upon this evidence, I find the Builder fell below the standard of construction by failing to minimize condensation as required by the Code, and by failing to meet the standard of workmanship and construction that applied at the time.
What is the amount of compensation due?
Submissions
103The appellant states that it is entitled to damages for a breach of warranty under s. 14(3) of the Act. It is entitled to be paid out of Tarion’s guarantee fund to rectify common elements with the intent to make the condominium corporation whole. The appellant states that the damages required are the cost of repair.
104The appellant’s expert, Mr. Leonard, has estimated that remedial work consisting of repairing spray foam around all windows and patio doors and providing appropriate undercuts to unit entrance doors would cost approximately $830,000 plus HST. In the alternative, Mr. Leonard states that the windows are reaching the end of their lifespan and should be replaced on a rolling basis within the next ten years. He testified that an alternative remedy to a full re-insulation of the existing windows would be a fund of $60,000 plus HST to compensate for additional work to repair and replace damaged insulation and drywall around the window openings when replacing the windows as required in the next ten years.
105The February 11, 2009 MH report, that recommended five tasks, included as part of task five the reinsulation of windows and doors. At that time, MH estimated that only 20-25% of openings needed to be reinsulated at a cost of $4000 per suite and totaling $150,000 to $190,000.
106The respondent states that the appellant has failed to show that the breaches caused any damage and therefore no compensation is due.
107In the alternative, Tarion argues that any award of damages needs to consider the length of time it has taken the appellant to pursue a remedy, which in turn has prevented Tarion from mitigating its damages. It states this is especially true because Claridge has no assets and recourse is only to Tarion’s guarantee fund.
108Finally, it argues that the $60,000 plus HST alternative offered by Mr. Leonard is a speculative amount.
Analysis
109The appellant is entitled to be placed in the position it would have been had the insulation been done correctly in the first place. That requires the reinsulation of some of the window and patio door openings.
110Replacement of all insulation surrounding windows and patio doors is not appropriate in this case because not all are deficient. The quoted cost is $830,000 plus HST for all openings deficient or not. In addition, if all the openings were re-insulated, all of that work would need to be re-done in ten years when all the windows are replaced anyway due to end of life cycle.
111The appellant’s alternate position of $60,000 to repair damage when the windows are replaced anyway is also unsatisfactory. The replacement of the windows would fix the insulation problems because new windows would be properly insulated during the replacement. However, it leaves the unit owners living with the common element deficiency for another ten years.
112The evidence has not established which specific openings need to be remedied. Although there was a suite-by-suite survey done in 2009, there was no building-wide testing of windows and patio doors with indoor RH maintained at 20% and outside temperature cold but not below -25 degrees. The delay in pursuing this appeal means that even if the above-testing were done today, it would not identify which windows had defective insulation from the start. This is because over time the windows themselves, the insulation, and other aspects, such as weather stripping, will have degraded from their original condition affecting the test results.
113MH stated in 2009 that 20-25% of the openings might require repair. I accept this figure as it represents an estimate of deficiencies closer in time to the completion of the Building. Applying that same 20-25% deficiency rate to the $830,000 estimate for repairs provided by Mr. Leonard in 2018, provides a range of $166,000 to $207,000.
114I find that the Strand is entitled to $166,000 plus HST in warranty coverage for this item. This amount provides funds to reinsulate 20% of the openings, based on the 2009 estimate of percent deficiencies, and the current estimate for the cost of repairs.
iv. Item 13 & 14 (W10 and W11) – air leakage around sliding doors and windows
115These two items are interlinked and so are grouped together. Item 13 states that there are cold drafts near the sliding doors in suites 308, 605, 610, 612 and 1011. Item 14 states that there is air leakage around the bathroom window of suite 509.
Is the Item Warrantable?
116There was no dispute that air leakage around windows and doors could be covered by the warranty.
Did Claridge fall below the standard of construction at the time?
Evidence
117These items were noted in the PA. However, by February 2007, MH documents tracking the outstanding claims from the PA, noted that these items had been corrected.
118Ms. Church testified that she was not able to determine what work the Strand had done on these items. She suggested that these items were corrected due to ongoing complaints by owners. She agreed that this item was not as high a priority as other items the appellant was addressing in the early years following the PA. Nevertheless, she stated that it was always a concern for the Strand. Complaints were addressed on an as-needed and unit-specific basis, and not on a systemic basis. She stated that she suspects these issues continue to exist in the Building today.
119Mr. Kayll testified that he did not know what repairs were made as that information was lacking from the Strand’s files. He agreed that those items appeared to have been resolved as of February 2007. He stated that after Ms. Church advised MH that the item had been corrected, MH would not have done any further examination.
120The appellant did not submit any expert reports specifically addressing these items.
121The respondent states that the procedural history of this item renders it impossible to determine if it breached the standard of construction at the time. In the normal course of a warranty claim under the Tarion regime, an item is conciliated by Tarion prior to issuing a WAR or decision. The Strand did not request Tarion conciliate this item in November 2007, March 2009, or March 2015, the dates of the conciliation requests. In August 2015, Tarion denied this defect in response to a request for a decision, without ever having conciliated the item.
122Mr. Fisher testified that although these items were reported as part of the PA, those complaints were a lay person’s view and there needed to be further proof of the deficiency. He stated there were no expert reports covering these items. Furthermore, the sliders on the windows and doors contain weather stripping which needs to be replaced over time due to wear and tear. Mr. Fisher stated there was no evidence of a maintenance program regarding that weather stripping. Finally, Mr. Fisher stated it was difficult to assess an item when it has been repaired as that prevents Tarion from being able to determine the state of the item prior to repair. It is the original condition that determines whether an item is warrantable.
123Mr. Buchan testified that his review of the expert reports showed no evidence of air leakage at all.
Analysis
124The appellant has failed to show that these items are warranted. The fact that this item was deemed resolved many years ago means that the engineering investigations and expert reports done to examine the claimed defects failed to address these items. The repairs done on a unit-by-unit basis lack records, making it difficult to determine which units were repaired and which units reflect an original state. Even if the original state of the units could be examined, the passage of time means that the weather stripping on those windows and doors is not an accurate reflection of the quality of the workmanship over a decade ago.
125Finally, there was no evidence of the damage caused by air leakage and further, what remedy was sought to address these items in particular.
126The appellant has been unable to establish that the air leakage around the windows and doors is as a result of poor workmanship or a violation of the Code such that these items should be warranted.
b. Item 19 (M13) Dual-Temperature Pipes
127Item 19 states that the insulation and/or vapour barrier on dual and chilled water piping is substandard, causing condensation. The system is called a dual-temperature system because the same pipes used for heating the Building are used for cooling it, with a changeover during the spring and fall to place heating pumps or chilled water pumps into service.
128The appellant states that the above item is further expanded upon in the PA by the following information:
Where reviewed all dual temperature (combined heating and cooling) piping insulation and/or vapour barrier has failed or was incorrectly installed and has caused condensation on the piping and in the insulation, which will likely result in external corrosion of the piping and potentially mold growth on the piping. This condition may also be similar within wall assemblies and at other concealed locations. This insulation was also not installed in accordance with Specification Section 15081-2.2.4, 2.2.5, 3.2.4, and 3.4.3.
Is the Item Warrantable?
129There was no dispute among the parties that deficient insulation around the pipes and a deficient vapour barrier could be warranted.
Did Claridge fall below the standard of construction at the time?
Appellant’s Evidence
130The appellant submitted that the purpose of the insulation and vapour barrier is to minimize thermal loss and prevent condensation on the surface of the pipes. The Strand states that standard was not met. In the alternative, the appellant states that even the standard supported by Tarion, that of minimization of condensation, was also not met. The appellant states that the defect is such that the overall purpose of the system is not met and therefore there is a breach of the warranty.
131The appellant retained five mechanical engineers to study the dual-temperature piping system. It states that all of them found that there was a clear defect of workmanship such that excessive condensation was resulting in damage.
132The following is a timeline of some of the key events after the PA:
Ms. Church stated drywall repairs had been done on a case-by-case basis.
MH early reports focused on the possibility that the condensation observed could lead to corrosion of the pipes, shortening the expected life of the pipes.
In 2008, MH noted that a contractor, Caesar’s Plumbing, had been hired by the Builder and had completed minor repairs in some locations in May 2007. Those repairs consisted of adding a thin layer of insulation over existing insulation and jackets and applying foil type pressure sensitive tape over the insulation. The repairs are noted as “workmanship not in accordance with industry standards.”
In March 2008, MH conducted a further review which examined nine areas of insulation and piping. Condensation and/or mold staining was noted on canvas jackets as well as surface corrosion of pipes. These findings were generally repeated in the MH report of October 2008.
In April 2009, Glencor Engineering (Glencor), metallurgical experts hired by the Builder, inspected the pipes. The findings of Glencor were somewhat similar to that of MH except that in some locations Glencor found that the moisture was caused by pipe leakages and not defective insulation.
In June 2009, MH commented that Caesar’s Plumbing had completed further repairs in May as recommended by both MH and Glencor. However, inspection of chilled water risers in concealed pipe chases inside occupant suites had yet to be done.
In 2011, Mr. Dahmer of Keller wrote a report that included a list of all the deficiencies in the insulation and vapour barrier. These included discolouration of canvas jackets due to water saturation, improperly finished canvas jackets, non-continuous insulation, less than 1” thickness in insulation in some areas, evidence of water pooling and mold, missing pipe insulation, incomplete insulation and wet insulation. He concluded that the insulation and vapour barrier installed did not meet the Code at the time of construction. He recommended that all the piping be assessed, and all insulation removed. Pipes with more than superficial corrosion were to be replaced. All corrosion on remaining pipes was to be sanded off. Pipes were to be painted and all new insulation installed.
In 2016, after further inspection by additional companies, GTT ONSET and G&L Insulation, Mr. Dahmer produced a further review of the dual-temperature pipe system that summarized the findings to date, which included information from a pipe corrosion and insulation investigation undertaken by the two companies above, a review of the Code and a cost estimate to replace the insulation. He stated that the deficiencies in the insulation violated the Code. He recommended removing all insulation, repairing and replacing corroded pipes and reinsulating.
In 2017, Mr. Dahmer wrote that although condensation levels would likely never be at zero, condensation should never be so excessive that it saturates the fibers of the insulation, causing the insulation to lose its thermal capacity, or be allowed to pool within the insulation, or leak through the vapour barrier damaging adjacent materials. He stated that drywall replacement should not be required after only 14 years of building life due to condensation leaks and that this is evidence that the minimums set out by the Code had not been met. He stated that there are excessive condensation problems.
Also, in 2017, Mr. Leonard of Goodkey produced a report after cutting open two risers to do investigative work on concealed areas of the system. He found insulation that was not continuous through floor penetrations and non-continuous vapour barriers where riser clamps were installed; pipe insulation on Victaulic joints that was compressed; and pipe insulation on expansion joints that was also compressed. He also found all insulation exposed had some staining, due to excess condensation within risers, beyond what could be reasonably expected. He wrote that mold growth was found in 50% of the riser cavities and some on the back of drywall.5 He stated he found mold in eight or nine of the 28 locations he investigated. He wrote that the mold growth was caused by the condensation that results from poor pipe insulation.
133Mr. Dahmer, mechanical engineer for Keller Engineering, testified regarding his investigations and the report he produced in 2011 that included a list of all the deficiencies in the insulation and vapour barrier. He testified that he noted water pooling and mold. He noted corrosion and water staining on a boiler but could not be certain if these damages were from condensation or leakages. In particular, he found wet insulation, including complete saturation. The amount of wetness, he stated, was incredible. While he agreed that there would be some condensation, he stated saw more condensation than he had seen in 99% of buildings he has viewed. In his opinion, the Building needed a full-scale replacement in order to prevent moisture running from the mechanical room down through the whole building. He stated that all the insulation had to be opened up to determine the full extent of wetness and corrosion.
134Mr. Leonard testified that his investigation revealed that the insulation was often attached with duct tape around the insulation jacket, compressing the insulation so that it lost its insulating value. He stated the manufacturers would not stand by the way the insulation was installed. He relied on the North American Insulation Manufacturers Association (NAIMA) Guide to Insulating Chilled Water Piping Systems with Mineral Fiber Pipe Insulation, written in 2015, as a guide to how insulation should have been installed. He said the same insulation practices should have been followed when the Building was built. He also relied on the Code as a minimum building standard which he stated requires the prevention of condensation. In his opinion, wet insulation does not prevent condensation, and that the condensation on the pipes is not normal and should not be expected.
135Mr. Leonard also stated that the purpose of opening up new sections of risers, as he did as part of his investigation, was to see what the original condition of the insulation and piping was.
136Mr. Leonard addressed some of the conflicting evidence as to whether some of the water staining and leaking was due to the failure of Victaulic couplings, possibly due to an overpressure event. In his opinion, he did not see any leaks and did not believe that leaks were the cause of any of the concerns he was flagging. He also stated that on-site investigations in 2017 showed staining in the mechanical room and at the base of risers in the parking garage despite previous attempts to repair the insulation only to have the moisture staining return. This, he says, shows that condensation remains an issue post the 2007-2009 leak repairs and that localized repairs will not solve the problem.
137Finally, in his opinion placing drip pans inside the risers to catch condensation before it drips on drywall is an unreasonable solution.
Tarion’s Evidence
138Mr. Fisher testified for Tarion. His opinion was that there was no evidence that the insulation on the piping was substandard.
139He stated he attended an inspection in 2009 that was also attended by MH and Claridge. Claridge agreed to repair and replace leaking and corroding sections of the dual-temperature pipe system. These repairs are referred to in the 2009 Glencor reports. Mr. Fisher’s conclusion was that MH was content to work with Glencor and that the areas of concern were being addressed.
140Mr. Fisher also stated that Dan McDonald of MH was unable to confirm whether or not the pipes had the proper amount of insulation. Mr. Fisher was familiar with Mr. McDonald and asked him at a meeting whether the insulation was substandard. Mr. Fisher stated that Mr. McDonald did not confirm that the insulation was substandard. When asked in cross examination, Mr. Fisher agreed that he based the Tarion decision in part on Mr. McDonald’s response, which consisted solely of Mr. McDonald shaking his head.
141Mr. Fisher said that had Mr. McDonald stated that the insulation was half as thick as required, or not Code-compliant, then he would have been warranted it. His denial was based on MH failing to give a quantitative measure as to what was substandard with the insulation and vapour barrier.
142In his Warranty Assessment Report dated May 13, 2009, Mr. Fisher stated that given that two engineering firms were actively investigating the issue of condensation on the pipes, the complaint would be held as under investigation pending the outcome of the engineers’ activities.
143Mr. Fisher testified that he believed the Strand and the Builder had resolved the matter. He also agreed with the opinion of Glencor, that damage viewed in the dual-temperature piping system was due to leaks and not condensation. In his view, condensation had caused only superficial damage.
144In terms of the Tarion warranty, Mr. Fisher held that there was no evidence of what the standard of workmanship required was and that there was therefore no evidence that the insulation and vapour barrier fell below a standard.
145Mr. Buchan, the expert for Tarion, testified that the dual-temperature system was an average system but one that is not used much anymore. He stated that the insulation he viewed was above-average and that condensation on the pipes was to be expected. He stated that although the system is substandard for today, it was standard at the time the Building was built. He stated that the undisturbed insulation he viewed in the mechanical room was well within the normal range. He also saw no evidence of mold. He stated that the focus had been on corrosion as a result of condensation, and that testing had since shown that above average corrosion was not occurring. He further stated that there is no standard for insulating pipes in the Code.
146Mr. Buchan viewed some of the drywall that was removed during the investigations in 2017 and found only minor drywall damage on the 14th floor and no systemic problems. In terms of any remaining concerns, in his opinion the installation of drip pans below bends in the piping would be an acceptable long-term solution.
147Tarion also submitted that some repairs have already been done and that staining on insulation is a normal condition of the system, especially a decade and a half into the life of the building.
148Tarion submits that drywall damage has not been proven. It argues that Ms. Church stated drywall repairs had been done but produced no documentation to support those repairs or costs. Mr. Leonard produced photos of the 14th floor damage, including drywall damage, but did not note any associated costs.
149Tarion submits that extensive mold damage has not been proven. Mr. Leonard conceded in cross-examination that possibly as low as 40% of the openings he viewed had mold on the inside of the risers. Mr. Buchan, on the other hand, stated he viewed no mold when he examined some of the drywall pieces at a later date. He states he only saw staining on drywall from the risers which was not proven to be mold. Although a small amount of mold was identified by a mold company, Tarion stated that there was no indication of how widespread the mold issues was. Further, there was no evidence of any risk to the inhabitants of the Building.
150Tarion also states that the appellant has failed to prove that wet insulation has prevented the system from working as it should. There was no evidence of damages related to thermal loss from inefficient heating or cooling.
Claridge’s Evidence
151Ronald and David Twigg, of Glencor, testified as experts for Claridge. They are both metallurgical engineers recognized as experts in the field. They conducted testing on the pipes in 2009 and 2017.
152In 2016 they produced a report summarizing the findings to date and commenting on the findings of the other experts. They summarized their findings from 2009 as follows:
Unit 103: significant corrosive attacks due to leaks and soaked insulation;
Garbage chute area: heavy corrosion with wet insulation and probably water rundown from leakage;
Unit 203: superficial to minor corrosion on the risers. Probable leakage from above or at the joints resulted in heavy corrosion at these locations;
Unit 308: only minor corrosion on the risers;
Unit 707: wet insulation and heavy corrosion with probable condensation rundown;
Unit 1007: superficial rusting consistent with condensation; and
Unit 1402: Some significant rusting due to condensation.
153Their 2016 conclusion was that where condensation had occurred, the corrosion on the piping appeared to be “superficial to mild attack.”
154In 2017 they conducted further testing on the dual-temperature pipes and found that there was only superficial corrosion on the pipes of an amount that was to be expected after a decade and a half of operation. Their evidence on these matters was accepted by the parties.
155They also found some bulges in the pipe expanders and damaged Victaulic couplings leading them to conclude that there had been an overpressure event during change over from heating to cooling or vice-versa. This overpressure event likely caused some of the leaks and staining observed. This damage would be unconnected to deficient insulation and resulting condensation.
156With regard to condensation, the Twiggs state that when the pipes are wet it can lead to corrosion. However, when they are hot, corrosive pitting, the most unpredictable and dangerous concern, does not occur. General corrosion starts out as a localized pit. Once formed, it can turn into a general attack on the pipe. This is because the pit itself can generate further corrosion even if the initial cause of the corrosion has stopped. In addition, the development from an initial pit to a true pit attack is non-linear and unpredictable. A pitting attack is a significant issue for the lifespan and integrity of the piping system. However, if the pipes are dry, corrosion does not occur, and therefore pitting does not begin, especially with hot pipes.
157The Twiggs are not experts on insulation, however, David Twigg did provide his opinion on what effect replacing the insulation now would have on future pipe corrosion. He stated that removing the insulation and replacing it could increase corrosion by introducing new chemicals to the system. This could lead to rapid corrosion.
Analysis
158There was significant disagreement amongst the witnesses as to the standard of workmanship that applies. Mr. Dahmer found a litany of issues when he investigated in 2011 and said the Building’s pipe condensation was worse than 99% of the buildings he had viewed. In 2016, his report stated that the deficiencies are contrary to the Code. Mr. Leonard argued that the overall failure of the insulation to meet its intended purpose, which was to minimize thermal loss and prevent condensation, was below the standard. On the other hand, Mr. Fisher testified that he wanted a quantitative measurement showing a deficiency. Mr. Buchan stated that the only standard we have is the Code, but denied that the deficiencies were violations of the Code. His expert opinion was that the piping insulation was above average. All parties agree the standard is not one of perfection. The key issue is where to draw the line between adequate workmanship, and workmanship that falls below the standard and is therefore a warranty breach.
159I find that the appellant has established, on a balance of probabilities that the insulation of the pipes was not constructed in a workmanlike manner and it fails to meet one of the purposes for which it was installed - to minimize condensation. The appellant has shown that the insulation was not installed in line with industry practices by showing: missing insulation, compressed insulation, saturated insulation, and insulation that does not minimize condensation. Inadequate and/or missing insulation is a deficiency that can lead to excess condensation and related drywall damage and mold growth.
160In determining damages, I prefer the evidence of the appellant’s experts who conducted thorough investigations of the system. I make an exception for the issue of pipe corrosion.
161In 2004, within one year of the Building’s completion, MH noted the inadequate insulation and vapour barrier on the dual-temperature pipe system in the PA. Their concern was excess condensation, corrosion, mold growth, drywall damage and thermal loss. This is significant evidence as the conditions noted in later years were the same as those observed when the building was newly-constructed.
162In March 2008, MH found condensation and/or mold staining on canvas jackets as well as surface corrosion of pipes. They noted that concealed spaces had not yet been examined.
163The 2011 and 2016 Keller reports came to the same general conclusion as MH in that the insulation was sub-standard and as a result the system was subject to excess condensation.
164In 2017, Mr. Leonard examined the interior of the risers by making 28 new riser openings for the purpose of determining as-built conditions. This is important because there were some pipe repairs done over the years, but none where the enclosed spaces were opened up. He found mold growth on jackets and drywall as well as condensation staining that he did not attribute to leaks inside the concealed risers. Even staining and mold in 40% of the concealed riser spaces is a significant amount. Mold growth was confirmed by laboratory analysis. These findings add further confirmation to the early expert reports.
165I find that the appellants have shown condensation, drywall and mold damage in the common element areas of the dual-temperature piping system.
166Pipe corrosion was a potential concern that has not been borne out by testing. The Glencor observations first confirmed corrosion then discounted it. In 2009, they concluded from observations that there had been some condensation that caused superficial to mild attack corrosion. In particular Unit 1402 had “some significant rusting due to condensation.” This is one spot where there appears to be no argument that the condensation caused corrosion. In 2009, Glencor suggested the pipes had a reduced life expectancy of 20%. However, in testimony they negated some of their earlier findings. They maintained that it is difficult to predict corrosion, and in particular pit attacks. But they testified that despite superficial corrosion caused by condensation, the pipes were now exhibiting a normal life expectancy. I accept that there has been superficial and mild attack corrosion caused by condensation but that damage beyond what can be expected as normal has not occurred.
167With regard to Tarion’s evidence, I have significant concerns with Mr. Fisher’s testimony. Mr. Fisher was not qualified as an expert, though he is an engineer. He testified that he denied this claim based partially on Dan McDonald of MH shaking his head at a meeting nearly a decade ago. This was not in the 2009 WAR. Had he advised as much in his report, it would have given the appellant or Mr. McDonald an opportunity to clarify what that head shake might have meant. Mr. Fisher valued that head shake over the significant number of expert reports provided. Mr. Fisher also stated that he needed a quantitative measure to allow the claim and one was not given to him. Given the Strand was expending significant cost and effort in retaining engineering experts to evaluate the problem, surely it would have been prudent of Mr. Fisher, as the key Tarion representative and decision-maker, to tell the Strand what he was looking for. He did not. I found his testimony to be dismissive of the evidence of deficiencies put in front of him.
168Mr. Buchan’s reports consisted mostly of document review and a few on site visits in 2017. He did not conduct his own investigation. In his opinion, he stated that the insulation was above-average. He also stated that it fully complied with industry standard practices at the time of construction with minor imperfections. However, Mr. Buchan’s testimony was at times contradictory. He emphasized that this building was a typical building that was not high-end, that the quality was as required by the Code, but no more. In testimony, he stated that the insulation was “standard” for the day, not above-average. His above-average conclusion, he said, was based on the quality of workmanship he observed in the mechanical room alone. I therefore do not accept his opinion of the quality of the insulation. I do agree with Mr. Buchan, however, that no weight should be placed on the G&L Insulation report due to the out of focus photographs contained in the report and the overall lack of quality. No one from G&L Insulation testified.
169I am convinced by the sum of the appellant’s expert witnesses that they have shown on a balance of probabilities that the insulation and vapour barrier in the building was not completed in a workmanlike manner and is therefore a deficiency covered by the warranty. The damages proven are excess condensation causing drywall damage and mold growth. The damages proven were shown to have occurred throughout the dual-temperature piping system and not just in localized areas.
170While condensation has caused some pipe corrosion, damages beyond what would have been expected have not occurred. In addition, the experts agreed that substandard insulation causes greater thermal loss, however no evidence supporting that potential damage was adduced.
What is the amount of compensation due?
Appellant’s Submissions
171The appellant argues that it is entitled to payment for damages due to breach of the warranty. The damages are the costs associated with the repair of the defect. There is no need to prove secondary damage.
172The appellant also pointed to the separate statutory obligations of condominiums to maintain and repair common elements. The appellant states it is required to repair the defect even if the Tribunal denies the appeal. The appellant states that the warranty program should work together with the obligations of the Condominium Act so that condominium owners are not burdened with defects caused by builders at the time of construction.
173The appellant is seeking the following damages to repair the dual-temperature pipe insulation:
Proposal - $25,000 plus HST;
Phase 1 work - $115,245 plus HST;6 and
Phase 2 work - $766,040 plus HST;7
Total: $906,245 plus HST
174The work quoted above, as described by Mr. Leonard in his testimony, is to replace the insulation on the accessible risers. It also involves a work-around, designed by him, to insulate the pipes as they travel through the floors, while also fire-proofing those openings as required for fire safety in the Building. One riser, deemed inaccessible due to its location primarily running through units, would be left untouched.
175Mr. Leonard also opined that the best solution might be to alter the current system to make it a heat pump system which would have hot pipes only and no potential for condensation. He stated it does not address all the insulation concerns, only the condensation. He conceded that this solution is not a repair, that it would be expensive, and that it was not what had been sent out for tender.
Tarion’s Submissions
176Tarion argues that the passage of time and the lack of mitigation on behalf of the appellant has prevented it from mitigating its own damages.
177Tarion pointed to case law that supported the proposition that the economic cost to bring a deficiency into compliance is not recoverable if there is no evidence of harm if the building is left as is.
178Tarion states that the remediation plan suggested by Mr. Leonard is not in accordance with industry standards. Also, Mr. Leonard’s plan would leave one riser untouched due to access issues. Tarion states it if is acceptable to the appellant to leave one riser untouched, then the same should hold for the other risers too.
179Tarion states that the proposed repair is unreasonable given the evidence of David Twigg, who provided the expert opinion that changing the insulation now would introduce new chemicals and could result in increased corrosion risk. Tarion states that the proposed remedy would make the situation worse.
180Tarion suggests the installation of drip pans would remedy the situation without needing to replace the insulation.
181Finally, Tarion argues that any compensation awarded must be proportional to the damages.
Claridge’s Submissions
182Claridge submits that David Twigg’s evidence makes it clear that replacing the insulation could have a corrosive effect on the pipes by providing fresh chemicals. Therefore, the repair may do more harm than good.
183Claridge also states that replacement of insulation is out of proportion with the benefit that doing so might provide.
Analysis
184The pipes should have been insulated properly in the first place. Section 14(3) of the Act states that an owner is entitled to receive payment out of the guarantee fund for damages resulting from a breach of warranty if the person has a cause of action against the builder for damages resulting from that breach. The Divisional Court stated in Liddiard8 that what is conferred by the warranty is the right to have done that which should have been done correctly in the first place or a sum of money to purchase the labour and materials to do so.
185Therefore, I find that the appellant is entitled to the cost of repairs. To that end, the Strand has provided evidence of the cost of repairs through the tendering process it undertook. The total cost is $906,285 plus HST.
186Nevertheless, this case diverges from the normal case due to the extended passage of time since the Building was built. David Twigg’s unchallenged evidence is that replacing the insulation at this late date when the system has already reached an equilibrium, could potentially cause severe corrosion, a very expensive problem to fix. Had this case been heard within a couple years after the claim had been made, those concerns that new chemicals would be introduced into an already stable system, would not have been applicable given the young age of the pipe system at the time.
187The respondent makes an attractive argument - to do the repairs would fix the problem but potentially cause more harm than good, therefore compensation should be denied. However, I have considered this argument and rejected it because it leaves the appellant shouldering the deficiency and damages caused by the Builder without compensation.
188I also reject the argument because awarding compensation does not necessarily require the appellant to complete the repairs proposed at the hearing. In Ontario (3512-ONHWPA-Claim) (Re),9 after finding sufficient evidence to award an amount to repair an HVAC system, the Tribunal went on to state that it would “leave it to the homeowner to rectify the damages through their own consultants, to their own satisfaction and in their own time. They are free to repair the high velocity combo system, to seek other advice and canvas other solutions if they wish, or to use the funds from the warranty to contribute to the cost of a total replacement.” While the decision is not binding on me, I find it useful as a reminder that the Tribunal has recognized in past decisions that the appellant is not required to carry out the proposed repairs. Here, the appellants are free to use the funds for whatever purpose they choose, in this case that may well be to contribute to the significantly greater cost of a converting the Building to a new heat only system as suggested by Mr. Leonard.
189Tarion also argues that since the damages to date are minor, the cost of repairs is out of proportion and I should therefore give an award proportional to the perceived seriousness of the damage. I have turned my mind to this option as well. Having reviewed the previous Tribunal case provided to me that purported to grant a proportional judgment,10 I do not find that the reasoning in that decision should be followed here, as the facts are distinguishable. In that case, the Tribunal refused to mandate repairs of brickwork as the cost was significant and there was no evidence adduced at all of the quantum of damages suffered. I also have no evidentiary basis that suggests an appropriate percentage on which a proportional award could be justified. Also, the warranty program provides compensation for the damages caused and it is recognized in past decisions and here, that one manner of determining the quantum of damages is the cost of repairs. If that cost of repairs is reduced due to the perceived significance of the damages, it would leave consumers subsidizing the cost of repairs even though the defect was covered by warranty. A proportional judgment in this case is not satisfactory for all these reasons.
190Tarion submits that the passage of time has caused greater costs and prevented Tarion from mitigating its damages. In 2009, however, MH provided a rough estimate that replacing the insulation would cost $4000 per unit. Multiplied by the 179 units in the Building and the cost estimate at the time was approximately $700,000. That amount has not unduly increased given the appellant’s accepted quote received in 2018, nearly ten years later, if one factors in the cost of inflation. I see no grounds to deny coverage now when the passage of time has not benefitted the appellant and has not changed the fact that the deficiency was caused by the Builder and there is warranty coverage that applies.
191Finally, it is within the discretion of the Tribunal to direct Tarion to take any action the Tribunal considers Tarion ought to take in accordance with the Act. Considering the lengthy history of the litigation between these parties, and the complexity of the repairs required to correct the deficiency, I direct Tarion to pay the compensation out of the guarantee fund rather than have Tarion complete the repair.
192The appellant has provided evidence that the cost of repairs is approximately $906,285 plus HST. They are awarded that amount.
c. Delay in Making Claim
Submissions
193Tarion argues that the delay by the appellant in seeking coverage from Tarion should result in a denial of coverage even if a warranted deficiency is found. Tarion in particular points to the five and a half year silence from 2009 until 2015. Tarion states a complete bar to compensation is warranted based on the facts of this case. Tarion, however, agrees that no statute of limitations applies to this case and that this argument is novel.
194The appellant argued that a delay on its own should not bar recovery unless there is prejudice. It states that there is no prejudice to Tarion due to delay. The Strand points to Mr. Leonard’s testimony that the repairs done today would have been the same as those required in 2009, therefore there is no failure to mitigate damages.
Analysis
195The facts do no support a complete bar to recovery due.
196It is agreed by all parties that no statute of limitations applies to this case. The Strand dutifully made its claim within the first year as required by the Act. Therefore, Tarion was put on notice of the claim within the warranty period. Between 2004 and 2009, the appellant was in regular contact with Tarion. When that communication ceased in 2009, Tarion could have taken steps to close the claim. Although I understand it was Tarion’s usual practice to issue a decision letter only once it was requested by the homeowner, it still had the option to issue one on its own initiative then. Had it done so, the appellant would have had fifteen days to appeal the decision letter to this Tribunal. Tarion did not take that step. To take punitive action against the appellant now for not communicating for five and a half years, ignores the fact that Tarion could have communicated with the appellant during that time and it could have taken steps to ensure that it properly closed the file by issuing a decision letter.
197In addition, I have already taken the passage of time into consideration in my analysis of each item above.
198As such, I decline to bar recovery due to the delay in bringing the appeal.
ORDER
199For the reasons set out above, I order as follows:
a. Item 11 & 12 (W8 and W9) – condensation on windows and patio doors: I order Tarion to pay the appellant $166,000 plus HST from the guarantee fund as damages for the warranted claims.
b. Item 19 (M13), deficient insulation of the dual-temperature pipe system: I order Tarion to pay the appellant $906,285 plus HST from the guarantee fund as damages for the warranted claim.
LICENCE APPEAL TRIBUNAL
Marisa Victor, Member
Released: May 17, 2019
Footnotes
- The item number refers to the claim as listed in the Decision, with the bracketed number (EC8, for example) referring to the same claim as listed in the PA.
- See Haider (Re), [1996] O.C.R.A.T.D. No 31 at para 43, aff’d in Haider v. Ontario New Home Warranty Program, [1997] O.J. No. 2726 (Div. Ct.) (collectively, Haider).
- Ontario Building Code Act, 1992, SO 1990, c. 23 and O. Reg. 403/97
- 37 unit-holders of 179 units responded to the audit survey.
- In testimony he stated that the amount could have been between 40% and 60%.
- This work has been completed.
- This amount was the lowest bid received out of three bids following tendering of the repair project.
- Liddiard v. Tarion Warranty Corp., 2009 CanLII 65801.
- [2008] O.L.A.T.D. No 184 at para 185.
- Ontario (3106-0ONHWPA-Claim) (November 10, 2006) [2006] O.L.A.T.D. No. 504 at paras 91-92.