Paktunc v. Tarion Warranty Corporation, 2022 CanLII 70542

Licence Appeal Tribunal

Date: 2022-07-29

Appeal of a Decision Letter of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act, R.S.O. 1990, O.31 (the “Act”), to deny warranty claims

Between:

Dogan Paktunc and Nilgun Paktunc Appellants

and

Tarion Warranty Corporation Respondent

DECISION AND ORDER

Adjudicator: Colin Osterberg, Member

Appearances:

For the Appellant: Dogan Paktunc, Self-represented For the Respondent: Ted Weredynski, Paralegal For the Proposed Added Party: David Contant, Counsel

Heard by Teleconference: June 10, 2022

REASONS FOR DECISION AND ORDER

OVERVIEW

1The respondent, Tarion Warranty Corporation (“Tarion”) brings this motion to add Greystone Village Inc. (“Greystone”) as a party to the appeal. The appeal is with respect to Tarion’s decision to deny the appellants’ warranty claims under the Ontario New Home Warranties Plan Act, R.S.O. 1990, O.31 (the “Act”). The appellants allege that their contract with Greystone required the construction of a house with a two-car garage and that it was built with a garage suitable for only one car. Tarion and Greystone deny that the appellants were promised a two-car garage or that this is something that is warranted under the Act.

2A case conference was held June 10, 2022. I heard submissions from the parties with respect to Tarion’s request to add Greystone as a party. On consent of the parties, Greystone participated in the conference call and made submissions with respect to Tarion’s request.

3For the reasons that follow, I am denying Tarion’s request to have Greystone added as a party.

ANALYSIS

4Section 14(8) of the Act names homeowners and Tarion as parties. O. Reg 627 under the Act provides that the Tribunal may specify additional parties in accordance with its rules.

5Rule 3.6 of the Licence Appeal, Animal Care Review Board, and Fire Safety Commission Common rules of Practice & Procedure, Version I (October 2, 2017) (the “Rules”) sets out that to add a party, that party must have a significant interest in the proceeding.

6Tarion’s letter requesting that Greystone be added as a party, which is dated April 26, 2022, gives the following reasons for that request:

• The Act requires the vendor to indemnify Tarion for compensation Tarion pays as a result of the vendor breaching the warranties in the Act and, if the Tribunal orders Tarion to pay compensation to the appellants, Greystone may be liable to Tarion.
• Participation of Greystone will benefit the case conference and hearing because of the potential for additional, helpful evidence and participation in settlement discussions.

7In its oral submissions, Tarion alleged that Greystone is bound by the decision of the Tribunal and is required by the Act and its agreement with Tarion to reimburse Tarion for any monies ordered paid. Tarion argues that natural justice requires that Greystone be allowed the ability to defend itself in these circumstances.

8In support of its allegation that a builder or vendor is bound by the decision of the Tribunal, Tarion cites s. 13 of O. Reg 627/20 under the Act (the “Regulation”) which provides:

(1) If a builder has offered or agreed to construct a home, commenced the construction of a new home or completed the construction of a new home, the builder shall indemnify the Corporation in circumstances where the Corporation has suffered any loss by reason of the builder’s failure to diligently perform or cause to be performed all obligations imposed by the Act or the regulations and under any agreement made with the Corporation in respect of the Plan.

9Tarion also states that the Vendor Agreement Greystone entered provides as follows:

The Registrant shall diligently perform the obligations heretofore or hereafter imposed upon the Registrant by the Act, the Regulations, this Agreement and/or the Bulletins and shall indemnify and save Tarion harmless from and against all losses, claims, and costs, damages and/or liabilities whatsoever heretofore or hereafter suffered or incurred by Tarion resulting from (or arising out of) any non- performance or inadequate performance of such obligations, in whole or in part, at the times,(and in the manner) as may be provided or contemplated by the Act, the Regulations, this Agreement and/or the Bulletins, provided written notice of a claim against the Registrant, or relating to any homes in respect of which the Registrant acted as Vendor (or that were enrolled by the Registrant) has been given to Tarion within the relevant warranty period(s).

10Tarion argues that a breach of a warranty, if one is found by the Tribunal to have occurred, constitutes such a failure and triggers the builder’s obligation to indemnify Tarion. I disagree.

11The plain wording of both the Regulation and the Vendor Agreement referred to by Tarion require Tarion to prove that the builder/vendor failed to perform the obligations imposed by the Act before it would be entitled to indemnification.

12In Yildirim v. Tarion Warranty Corporation, 2019 ONSC 945 (Div. Ct.) (“Yildirim”), the Divisional Court interpreted similar provisions dealing with indemnification of Tarion in respect of warranty claims to require Tarion to establish the vendor’s or builder’s breaches of its obligations before being entitled to indemnity.

13In Yildirim, the Divisional Court states that the purpose of the Act is to help consumers obtain compensation as quickly and affordably as possible and that the Act provides a scheme where consumers deal with Tarion and Tarion then deals with the builders or owners by way of indemnity, subrogation, registration conditions, or otherwise. The Court states that vendors and builders have recourse against Tarion if and when they are called upon to indemnify it for a payment made to a purchaser. That recourse is by way of arbitration or action and that:

…for Tarion to obtain indemnification it must establish the vendor’s or builder’s breaches of its obligations. The vendor does not go to the LAT to defend itself from indemnity claims. Rather, Tarion has to go to court…where the burden lies squarely upon Tarion to prove the vendor/builders’ lack of diligent performance both in substance and quantum.

14Although the Court in Yidirim states that a vendor or builder whose work is at issue and who may ultimately bear the economic cost of a decision by Tarion to pay a warranty claim has a tangible economic interest in Tarion’s decision, the Court does not consider that interest sufficient to require that notice be given to the vendor or builder. The Court concludes that such notice would be inconsistent with the statutory scheme of the Act which is intended to protect consumers, and which provides for disputes between builders and Tarion to be resolved separately, in the courts, and not at the Tribunal.

15While the Act now requires notice of Tarion’s decision to be given to the builder, it does not require that notice of the claimant’s appeal be given provided to the builder and, in my view, the analysis in Yidirim still applies. The builder’s interest in the outcome is not significant in itself to require that the builder be given notice of Tarion’s decision and a requirement under the Act that the builder be given notice does not change the significance of that interest. The scheme of the Act is unchanged and the consumer protection focus remains.

16I find that the potential that Greystone might be liable to Tarion in an indemnification claim is not a significant interest in this appeal because Greystone is not bound by the decision of the Tribunal and maintains its right to dispute Tarion’s claim for indemnity should Tarion determine to make such a claim. While Greystone may benefit if Tarion is successful at the hearing or if Tarion decides not to pursue its indemnity claims, and to that extent is interested in the outcome of the appeal, that would be true in every such case and does not amount to a significant interest for the purposes of adding Greystone as a party.

17To be added as a party, Greystone must show that it has a significant interest in the proceeding. The issue at the Tribunal is whether the appellant should be compensated by Tarion with respect to breaches of warranty. The Tribunal hearing is not intended so that Greystone can defend its workmanship in hopes of minimizing potential indemnification claims, or so that Tarion can avoid having to prove its own claim for indemnification against Greystone if the Tribunal finds in the appellant’s favour.

18Rather, as the Divisional Court held in Yidirim, the purpose of the statutory scheme is to enable consumers to obtain compensation without becoming bound up in protracted and expensive litigation with the vendor or builder responsible for the defects in construction.

19The ability for Greystone to protect itself from the potential of a future claim does not rise to the level of a significant interest in this proceeding. The parties to the indemnification proceeding, if one is pursued, would be Tarion and Greystone. Greystone maintains its procedural rights to defend itself in that claim and is not automatically liable to Tarion in the event of an adverse Tribunal decision.

20Greystone takes the position that the appellants are making allegations which go beyond workmanship, and which have potential to damage Greystone’s reputation. Greystone also says that the appeal has implications which may impact claims relating to other homes which were constructed with the same design as the appellants’ home. I am not satisfied that this amounts to a significant interest as it relates to this appeal. The appeal is not with respect to matters of contract between the appellants and Greystone, but whether there has been a breach of warranty under the Act. Moreover, Greystone did not present any evidence at the motion hearing which supports that there might be any reputational issues of significance in this appeal. Likewise, Greystone presented no evidence to support the allegation that the appeal might affect other homes constructed with the same design as the appellants’ home. In any event, the ability for Greystone to avoid claims of homeowners who are not parties to this appeal does not constitute a significant interest in this appeal for the purpose of adding Greystone as a party.

21With respect to Tarion’s position that the participation of Greystone in this appeal will “benefit the case conference and hearing because of the potential for additional, helpful evidence and participation in settlement discussions”, I am not satisfied that this has been established. If Greystone’s evidence is required, then Tarion may call a representative from Greystone as a witness. Moreover, there is nothing preventing Greystone from participating in settlement discussions while a non-party and there was insufficient evidence presented to suggest that party status would result in better settlement prospects.

22I am not satisfied that Greystone has a significant interest in this proceeding.

ORDER

23For the reasons set out above, the motion to add Greystone as a party is denied.