Date: 2022-02-03

Appeal from a decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act to disallow a warranty claim

Between:

Hong Ye

Appellant

and

Tarion Warranty Corporation

Respondent

DECISION AND ORDER

Adjudicator: Colin Osterberg, Member

Representatives:

For the Appellants: Hong Ye, Self-represented

For the Respondent: Danielle Peck, Counsel

Hearing in Writing December 29, 2021

REASONS FOR DECISION AND ORDER

A. OVERVIEW

1The Respondent, Tarion Warranty Corporation (“Tarion”) issued a decision letter dated July 15, 2021 (the “Decision Letter”), denying claims made by Hong Ye (the “appellant”) under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “Act”). The appellant’s claims relate to a residential house owned by her which was constructed in 2013. The only warranty coverage available to the appellant under the Act is for major structural defects.

2The appellant alleges that vertical cracks in the foundation of the house constitute a major structural defect which is warranted under the Act, and that she is entitled to compensation. Tarion denies that the appellant has proven that she has suffered damage because of a major structural defect and has denied her claim. Tarion also alleges that the claim that is the subject of this appeal has been settled and that the appellant is not entitled to bring this appeal.

B. ISSUES

3The first issue to be determined is whether the warranty claim being made by the appellant has been settled.

4If the warranty claim has not been settled, the second issue is whether the appellant has proven on a balance of probabilities that she has suffered damages because of a major structural defect as defined in the Regulations under the Act.

C. EVIDENCE AND ANALYSIS

The alleged agreement to settle

5The parties agreed to participate in a mediation to settle the appellant’s warranty claim and the mediation was commenced February 17, 2021. The parties were unable to reach a resolution but agreed that Tarion would continue to investigate the claim by hiring a professional engineer to investigate and determine what the best course of action is to resolve and repair any warranted deficiencies. Once that investigation was completed, the parties continued the mediation on April 19, 2021 and came to an agreement that is reflected in a Claim Resolution and Release (the “Release”) which was signed by the appellant on May 5, 2021.

6Tarion argues that, by entering the settlement and signing the Release, the appellant’s warranty claim was resolved in its entirety and that she has no further claim under the Act. The appellant says that the agreement was only with respect to certain specific claims and that her claims in this appeal were not part of the settlement and not covered by the Release.

7Tarion argues that settlements are to be encouraged and that they should be enforced in accordance with their terms. I agree. However, in this case the Release does not purport to settle the warranty claims that are the subject of this appeal.

8The Release does not state that it applies to all warranty claims under the Act. It does not state that the appellant is agreeing to resolve all her claims under the major structural defect warranty. The Release does not state that the appellant is abandoning the claims made that are the subject of this appeal. In fact, the Release does the opposite: it states that only the appellant’s claims “for the item(s) set out below” are being resolved; it states that the amount paid under the agreement may reduce the limit of coverage available to the appellant – which I find to be a specific acknowledgement of her ongoing warranty claim; and the Release is silent with respect to its impact on this appeal.

9Tarion drafted the Release. If it was intended to apply to all the appellant’s remaining warranty claims, including the claims that are the subject of this appeal, then it should have said so in clear language. Instead, the Release specifically limits its application to certain specified claims which do not include the claims made in this appeal.

10I find that the Release does not, nor does it purport to, dispose of the appellant’s major structural defect warranty claim that is the subject of this appeal.

Major structural defects

11The appellant bears the onus of establishing that there is a breach of warranty under s. 13(1)(b) of the Act which requires that the home be free of major structural defects as defined by Reg. 892, R.R.O. 1990 under the Act (the “Regulation”). Section 1 of the Regulation defines “major structural defect” to mean:

(a) …any defect in work or materials in respect of a building, including a crack, distortion or displacement of a structural load-bearing element of the building, if it,

i. results in the failure of a structural load-bearing element of the building,

ii. materially and adversely affects the ability of a structural load-bearing element of the building to carry, bear and resist applicable structural loads for the usual and ordinary service life of the element, or

iii. materially and adversely affects the use of the significant portion of the building for usual and ordinary purposes of a residential dwelling and having regard to any specific use provisions set out in the purchase agreement for the home.

12The appellant alleges that vertical cracks in the foundation of the house materially and adversely affect the ability of a structural load-bearing element of the building to carry, bear and resist applicable structural loads for the usual and ordinary service life of the element thus qualifying as a major structural defect under s. 1(a)(ii) of the Regulation. She also alleges that the vertical cracks have allowed, and continue to allow, water to enter the basement, resulting in, among other things, mould to form thus adversely affecting the use of a significant portion of the building for usual and ordinary purposes of a residential dwelling thus qualifying as a major structural defect under s. 1(a)(iii) of the Regulation.

Structural load-bearing – 1(a)(ii)

13The appellant relies on two engineering reports prepared by XV Engineering Services (“XV”) in support of her argument that there is a major structural defect under s. 1(a)(ii) of the Regulation. Tarion submitted engineering reports of Terraspec Engineering Inc. (“Terraspec”) and Norman Lee & Associates Ltd. (“Lee”) in support of its position that the appellant has not proven a major structural defect under this section.

14The XV reports were prepared by Maia Voroch and Peijing Xu, both of whom are professional engineers. Their curricula vitae were not provided and the only information that was submitted about their qualifications to express an expert opinion with respect to the issues in this appeal are screenshots of what appear to be their profile pages from the Professional Engineers of Ontario website. Engineer Voroch’s profile page indicates that she obtained a degree in civil and industrial engineering in 1977 from the University of Architecture in Bulgaria. She was first licensed as an engineer in Canada in 1996. Engineer Xu’s profile indicates that she received a Master of Engineering degree in civil and structural engineering in 1988 from Tianjin University in China and a Master of Applied Science degree from the University of Windsor in 2007. She was first licensed as an engineer in Canada in 2009.

15While I accept that the XV engineers are qualified to give opinion evidence with respect to the structural condition of the appellant’s house, I have been provided minimal information with respect to the level and specific nature of their expertise and experience which I have considered when determining the weight to give to their evidence.

16According to the first XV report, dated June 11, 2020, the vertical cracks were caused, in part, by concrete shrinkage and lack of horizontal wall reinforcement, and that control joints could have resulted in cracks which were less wide. XV also stated that settling can contribute to the formation of cracks in foundation walls and that there was some evidence of that occurring in this case including the development of cracks on the drywall above the foundation cracks as well as a crack in the tile floor in the middle of the house.

17XV concludes that the foundation cracks are large enough to cause structural concern and waterproofing issues. It states that foundation walls and footings are structural load-bearing elements, supporting both floor and roof structures of the house and that the increasing width of the vertical cracks and foundation movement will adversely affect their load resisting ability and could lead to more settlement and damage to the structure above.

18I have several concerns with respect to XV’s June 11, 2020 report. They include:

a. the report alleges that the maximum crack width was 8 mm and refers to attached photographs. The photographs show a crack being measured with a tape measure and which shows a crack with a maximum width of what appears to be about 5 mm.

b. the report states that the cause of the vertical cracks was the failure by the builder to use horizontal wall reinforcement and control joints. In support of its allegation that control joints were required, the report cites s. 9.15.4.9 of the Ontario Building Code and suggests that, since the house dimension is over 55 feet long, the failure to install control joints caused the cracks. In fact, that section of the Building Code only requires control joints where foundation walls are more than 25 meters long. Since the appellant’s house is only 55 feet (17 meters), control joints were not required by the Building Code as is alleged.

c. XV did no testing to determine whether settlement was occurring, whether it was ongoing, whether the foundation soils were adequate to prevent further settlement, whether the width of the cracks were actually increasing or whether there was ongoing foundation movement.

d. the conclusion expressed by XV is not that there is a “major structural defect” as defined in the Regulation and the conclusion that is reached is not supported by any meaningful analysis. The report simply states the following:

At present, the existing cracks are large enough to cause structural concern about the integrity of foundation walls and foundations, as well as waterproofing issues in the basement, such as water penetration, mold growth, insulation damage, etc. Exterior foundation walls and footings are structural load-bearing elements, supporting both floor and roof structure of the house, and the increasing width of the vertical cracks and foundation movement will adversely affect their load resisting ability and can lead to more settlements and damage of the structure above.

19I find XV’s conclusion to be vague and lacking in analysis. The statement that “the cracks are large enough to cause structural concern…” is not a conclusion that they “materially and adversely affect the ability of a structural load-bearing element of the building…” as required by the Regulation. The conclusion does not state that the cracks will likely lead to settlement and damage, only that it can. The report provides inadequate bases upon which to conclude that the condition of the foundation meets the definition of major structural damage under the Regulation.

20In response to XV’s first report, Tarion retained Terraspec to investigate the appellant’s house with respect to the cracks in the foundation walls and interior water damage. The Terraspec report is dated September 10, 2020 and was signed by N. A. MacKinnon and Ramesh Savaliya. According to MacKinnon’s CV, they obtained a degree in civil engineering in 1970 from Queens University. They have worked as a geotechnical engineer and in transportation and public works since then. The majority of MacKinnon’s work experience appears to be in the area of road construction although they do have extensive experience in building and structure design, including foundation design and concrete structure design. According to Savaliya’s CV, he obtained his Bachelor of Engineering degree in structural engineering from Michigan State University in 1996 and a Master of Science degree in structural engineering from Ohio University in 2020. His professional experience has been in the area of structural design and structural engineering since 1998. Savaliya’s CV details his extensive experience in the field of structural design and structural engineering, including foundation design and concrete structure design.

21The Terraspec engineers are qualified to provide expert opinion evidence with respect to the structural condition of the appellant’s house including the issues raised in this appeal.

22Terraspec conducted a site inspection of the house and subsoil in preparing its opinion. Vertical cracks were observed near the centers of the north and south foundation walls. The crack width on the south side was 5 mm at the top and 1.5 mm at the bottom. On the north side, the crack width was 3 mm at the top and 2 mm at the bottom. Terraspec drilled two test holes at the site of the cracks on both sides of the house and analyzed the soil conditions. It found that the available bearing capacity of the clay subsoil is 120 kPa SLS. The required soil bearing capacity according to the design drawings is 75 kPa SLS and the actual load from the house is less than 50 kPa SLS.

23Terraspec acknowledged that there was a potential for differential settlement between the front half and back half of the house but stated that the difference in height between the east and west foundations was typically 1 mm and that there was no strong evidence of an ongoing settlement problem or a heaving problem with respect to the house footings on the clay subsoil.

24Terraspec did hammer testing on the wall which indicated that the concrete within the foundation walls was relatively good.

25Terraspec concluded that the cracks may have formed due to shrinkage of the poured concrete foundation walls and stated that it may have been beneficial for the builder to have included rebar in the wall to hold the cracks tight together or to have placed a control joint within the length of wall, although neither of these measures were technically required by the Building Code.

26Terraspec concluded that the vertical cracks currently do not pose a risk to the structural integrity of the house. It states that it would be prudent to continue to monitor the width of the cracks until repair of the cracks is completed to be sure that the crack width is not increasing.

27I have concerns with respect to the Terraspec report. Terraspec acknowledges the possibility that differential settlement may have contributed to the vertical cracks but its testing to determine the extent of the problem or whether the settlement was ongoing appears incomplete. Test holes for soil competency probably should have been done at the east and west areas of the house rather than in the center where the old and new foundations meet. Greater detail with respect to the height differential at the north and south sides of the house may have been helpful as well. Terraspec says that the cracks should be monitored to determine whether or not they are continuing to widen, but does not express an opinion with respect to the impact that might have on the structural integrity of the house, what amount of further widening might be a concern, or what effect on its conclusions about the house’s structural integrity further widening would have.

28In response to the Terraspec report, XV did a second site visit and prepared a second report dated November 17, 2020. XV notes that the current house was built on the foundation of a previous house in that location and that the new house extended further than the old house requiring the construction of an addition to the existing foundation. The cracks appeared near where the new foundation meets the old foundation. In addition, XV conducted research and found that the old footings were located deeper than the new footings and that backfill was required to reach the new footing elevation. XV concluded that it was “obvious” that the backfill was not sufficiently compacted and that this resulted in the new foundation settling at a different rate than the old foundation.

29XV concludes that the large vertical cracks in the foundation walls materially and adversely affect the ability of the foundation wall of the house to carry, bear and resist applicable structural loads from the structure above for the usual and ordinary service life and that this should be considered a major structural defect. XV states that structural repairs are needed and should be carried out in a timely manner to prevent further deterioration of the foundation wall.

30In preparing its second report:

a. XV did no further testing of its own. It did no soil testing and did not measure the height differential between the north and south foundation walls.

b. XV does not explain why it was obvious that the area was not compacted well and does not state why it concludes that settlement may be an ongoing issue. It criticizes the location of the test holes used by Terraspec but did not drill any test holes of its own.

c. XV states that Terraspec’s findings that the difference in height between the front half of the house and the back half was about 1 mm were “questionable” but provides no explanation for this statement. Given that XV did not undertake any testing of its own, if find this comment gratuitous and unsupported by any evidence.

d. XV states that it measured crack widths as large as 12.99 mm and attached photos that show this measurement. However, it appears clear from the photos that XV was measuring well beyond the actual size of the crack and included an area where the concrete was chipped around the sides of the crack. It made no such observations in its first report 5 months earlier and no such crack width was noted by Terraspec in September 2020 or by Norman Lee in March 2021. I find that the measurement reported by XV is inaccurate and misleading.

e. XV concludes that the cracks “adversely affect the ability of the foundation wall to carry, bear and resist applicable structural loads from the structure above for the usual and ordinary service life.” As in their first report, XV provides no support for this conclusion by way of evidence or analysis.

31Engineer Lee was retained to investigate the foundation wall cracks in March 2021 and his report is dated March 19, 2021. According to Mr. Lee’s CV, he received an engineering diploma from Acadia University in 1978 and an engineering degree in civil engineering from the University of New Brunswick in 1981. He obtained his Master of Applied Science degree in civil engineering from the University of Waterloo in 1983. His CV briefly describes that Mr. Lee has worked as an engineer and designer in, among other areas, structural engineering and concrete engineering projects.

32Like the XV engineers, Lee’s experience and expertise is largely unknown to the Tribunal. I accept that Lee is qualified to give opinion evidence with respect to the issues raised in this appeal relating to the structural condition of the appellant’s house, however the fact that I have been provided minimal information with respect to the level of and specific nature of his expertise and experience and the lack of detail affected the weight that I gave to the opinion.

33I also note that Lee was retained by Tarion pursuant to an agreement reached at the first stage of the mediation process. The agreement was that Tarion would retain a third-party engineer to investigate and determine what the best course of action would be to resolve or repair any warranty deficiencies. However, Lee did no testing of his own and his site investigation appears to have been limited to measuring the width of the cracks and citing the findings of Terraspec (and mostly ignoring the reports of XV). Tarion has criticized the XV engineers for failing to conduct any testing before rendering its opinion but asks the Tribunal to accept Lee’s opinion despite the same failing. I am also concerned that Tarion did not conduct further investigation of the cracks as it undertook to do in its first settlement agreement with the appellant—it appears Lee simply reiterated Terraspec’s findings with no further testing, investigation, or analysis.

34Lee reviewed the reports of XV and Terraspec and conducted a site visit at which time measurements of the cracks were taken which indicated a width range of between 2 mm and 6.2 mm. Lee does not make any comment of the fact that the measurement of the width of the cracks appears to be slightly greater than when they were when measured by Terraspec. However, there is no engineering evidence as to whether or not this amount of widening might be a concern with respect to the structural integrity of the foundation or whether it might reflect that different areas of the crack were measured or that different measuring techniques were used. A conclusion that the difference in measurement is evidence of a structural problem is unsupported by the evidence presented.

35Lee concludes that control joints are not a Building Code requirement in the circumstances; that the compressive strength of the concrete foundation is structurally adequate to support the building structure; and the foundation cracks were likely caused by the differential settlement of the front half and back half of the building. Lee also concludes that, since the foundation was found to be resting on competent soil with a bearing capacity of 120 kPa SLS, the cracks on the concrete foundation walls do not affect the overall structural integrity of the building structure.

36With respect to the soil competency, Lee’s opinion is based on the soil at the location of the test holes placed by Terraspec. The appellant argues that the fact that those test holes were located adjacent to the crack locations in the center of the north and south side of the house calls their usefulness into question. The appellant argues that testing should have been done at the east and west sections of the house where settlement was more likely given the location of the cracks. This may be true but there is no engineering evidence which supports the allegation that soil competency in those areas is inadequate. Even though there was likely differential settlement, since no testing was done at the east and west ends of the building, I cannot conclude that the soil competency, or the compaction in those areas, was inadequate or that it is evidence of an ongoing problem.

Conclusions regarding s. 1(a)(ii)

37I am not satisfied, based on the evidence before me, that there is a major structural defect in the appellant’s home under s. 1(a)(ii) of the Regulation.

38The conclusion of XV is unsupported by its own testing or the testing done by Terraspec. XV did not present any structural analysis as to how it came to the conclusions that the cracks materially and adversely affect the ability of the foundation wall of the house to carry, bear and resist applicable structural loads from the structure above for the usual and ordinary service life and that this should be considered a major structural defect.

39Terraspec inspected the cracks and footings, tested the strength of the concrete in the foundation and drilled test holes to determine the bearing capacity of the subsoil. Terraspec found no strong evidence of an ongoing settlement problem or a heaving problem with respect to the house footings on the clay subsoil and concluded that the vertical cracks in the foundation walls currently do not pose a risk to the structural integrity of the house.

40Lee’s opinion is largely based on the testing done by Terraspec and comes to the same conclusion. Lee’s opinion adds almost nothing to the analysis.

41I find that the appellant has not discharged their onus of proving on a balance of probabilities that the cracks meet the test for finding a major structural defect in s. 1(a)(ii) of the Regulation. Although I have concerns with respect to the reports of Terraspec and Lee, as described above, the onus is not on Tarion to prove that there is no major structural defect. I place diminished weight on the opinions of XV in that regard given the lack of information presented as to the qualifications of its engineers and their failure to conduct sufficient testing or to present sufficient analysis in support of their conclusions.

Adverse affect on use – s. 1(a)(iii)

42The appellant presented very little evidence with respect to the effects the foundation cracks have on the “use of a significant portion of the building for usual and ordinary purposes of a residential dwelling”. It is alleged that the cracks allow water penetration into the basement and that this has caused mould growth, insulation damage, and other damages. There was no evidence presented that there are significant, or any, portions of the house that are not being used.

43XV stated in its first report that the cracks are large enough to cause waterproofing issues in the basement “such as water penetration, mould growth, insulation damage, etc.” There is no other discussion of this issue in either of the XV reports.

44Terraspec reported that it found “no tell-tale evidence of water seepage through the cracked concrete in the foundation walls. The interior drywall directly over the two crack locations was removed and inspected and there was no moisture and no mould present on the back side of the drywall.” Terraspec also stated that there appeared to be condensation issues and possible overflow conditions in the downstairs laundry room/toilet area, and in the furnace room which caused black mould to form in those locations and on the drywall of surrounding rooms. Terraspec stated that the condensation may have come from the furnace and air conditioner.

45Tarion retained LEAP Management Inc. (“LEAP”) to conduct an air quality and mould assessment in the appellant’s home on September 1, 2020. Lilja Palsson, the president of LEAP, conducted the assessment. Ms. Palsson received an honours degree in Biology from the University of Waterloo in 2003, a post-degree diploma in Environmental Engineering from Conestoga College in 2004, an Occupational Hygiene designation from Ryerson University in 2010, and has had the designation of Canadian Registered Safety Professional since 2009. She has worked as an environmental specialist conducting air quality, mould, and asbestos surveys since 2004. I find that Ms. Palsson is qualified to give expert opinion evidence in the area of air quality assessment including the presence of and cause of mould and other pollutants in buildings.

46LEAP’s assessment of the appellant’s home included a visual inspection, moisture readings, and the collection of a surface sample, indoor samples, and an outdoor reference sample. LEAP found that the mould present in the Appellant’s home was probably due to constant leakage from the laundry room sink, high humidity and condensation in the basement, and poor occupant lifestyle and maintenance. LEAP stated that the foundation cracks probably did not contribute significantly to the mould growth since moisture readings around the cracks indicated that the area was not wet and mould growth in those areas is present mainly on the interior surfaces and not on the drywall backing paper, which would occur if the source of moisture and mould growth was the foundation cracks.

47I accept the conclusion of LEAP. They are consistent with the findings of Terraspec and are uncontradicted by any other evidence presented by the parties. Although XV concluded that the cracks are wide enough to cause water issues in the basement, it did not present evidence that there are such water issues.

48I find that the appellant has not proven on a balance of probabilities that the foundation cracks materially and adversely affect the use of the significant portion of the building for usual and ordinary purposes of a residential dwelling under s. 1(a)(iii) of the Regulation.

D. SUMMARY

49The appellant has not proven on a balance of probabilities that there is a major structural defect in the home according to the Act and Regulation.

E. ORDER

50Having considered the evidence and the submissions of the parties, the Tribunal orders Tarion to deny the appellant’s claim as set out in the decision letter dated July 15, 2021.