1499469 Ontario Inc. and 498599 Ontario Limited v. Tarion Warranty Corporation, 2025 CanLII 58818

Citation: 1499469 Ontario Inc. and 498599 Ontario Limited v. Tarion Warranty Corporation, 2025 ONLAT 16030 and 16031 ONHWPA

Licence Appeal Tribunal File Numbers: 16030 and 16031 ONHWPA

Appeal under s. 10.6 the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31

Between:

1499469 Ontario Inc. and 498599 Ontario Limited

Appellants

and

Tarion Warranty Corporation

Respondent

DECISION

VICE-CHAIR:

Avril A. Farlam

APPEARANCES:

For the Appellants:

Peter Mitchell, Counsel

For the Respondent:

Cindy Zhou, Counsel

HEARD: December 2, 4, 5, 2024, February 18, 19, 21, 24, 26, 28, March 3, 21, 25, 2025

OVERVIEW

1The appellant 1499469 Ontario Inc. (“1499”) appealed a Notice of Proposal issued June 6, 2024 (“1499 NOP”) by Tarion Warranty Corporation (“Tarion” or “Registrar”) which refused to grant an application for qualification for enrolment under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (“Act”) to sell and build eight freehold homes and, to build eight homes under construction contracts with owners of land, a total of 16 homes.

2The appellant 498599 Ontario Limited (“498”) appealed a Notice of Proposal issued June 6, 2024 (“498 NOP”) by Tarion which proposes to revoke the determination that that the 16 homes qualify for enrolment under the Act. 498 was granted authorization to sell the 16 homes by Tarion in January, 2020 when 498 signed the Terms and Conditions letter issued by Tarion.

3Tarion is responsible for determining whether a home qualifies for enrolment in the Ontario New Home Warranties and Protection Plan (the “Plan”) Qualification for Enrolment (“QFE”) under the Act. Here, Tarion granted authorization for these homes prior to February 1, 2021. This resulted in the 16 homes being deemed to have QFE when the legislation changed on February 1, 2021 pursuant to s. 21 of Ontario Regulation 627/20 (“Reg. 627”) under the Act.

4Tarion’s position is that it has, pursuant to s. 10.3 of the Act, considered the past and present financial position and conduct of 1499 and its “interested persons” as defined in the Act. One such interested person of 1499 is 498 because 498 is a company controlled by officers and directors Paolo Cusinato and Angelo Cusinato and both 1499 and 498 operate under the business name Cusinato Developments. This fact is not in dispute. The appellants conceded at the hearing that 1499 and 498 are “interested persons” of each other under the Act (collectively the “appellants”).

5In summary, Tarion’s position is that 498’s QFE for the 16 homes should be revoked because as at the date of the NOP 498 owes Tarion $351,293.64 in respect of warranty breaches as a result of 498”s inability to properly construct homes and service the warranties. 498 has failed to indemnity Tarion for the funds Tarion has spent in respect of warranty breaches despite repeated requests. This constitutes a breach of 498’s obligations under Reg. 627, a breach of the Vendor/Builder Agreements between 498 and Tarion, a failure to continue to meet prescribed conditions in Ontario Regulation 638/20 (“Reg. 638) under the Act, a “material change” within the meaning of Reg. 638, which amounts to a breach of the condition prescribed under s. 3.3 of Reg. 638, and a breach of condition prescribed under s. 3.2 of Reg. 638.

6In summary, Tarion’s position is that 1499’s application for QFE for 16 homes should be refused because of the foregoing alleged conduct of 498 given that 1499 and 498 are “interested parties in respect of each other”.

7In its August 7, 2024 Case Conference Report and Order in file number 16030/ONHWPA, the Tribunal ordered that both appeals be heard together.

8The appellant’s position set out in both Notices of Appeal is:

a. The alleged deficiency items are not properly warranted;

b. In the alternative, the alleged deficiency items did not give rise to any damages;

c. In the alternative, the appellant was denied the remedial access prescribed by the provisions of Regulation 892;

d. In the alternative, the amounts paid out by Tarion to address the alleged deficiency items were unreasonable and excessive in all the circumstances;

e. Tarion failed to issue a coherent report reflecting either a subsection 13(1) finding that the alleged deficiency items were warranted or a subsection 14(3) assessment of what repairs or compensation were required to remedy same.

PRELIMINARY ISSUE – APPELLANT’S MOTION FOR DISCLOSURE

9The hearing of this appeal was scheduled to start December 1, 2024. On Sunday, December 1, 2024, the appellants filed a Notice of Motion, Affidavit of Mr. Cusinato, and submissions in support of their motion for an order under Rule 9.2.1(f) of the Licence Appeal Tribunal Rules, 2023 (“Rules”) “requiring the Registrar to disclose all previously undisclosed information, documentation or communications not prepared in contemplation of litigation that were either consulted, created or relied upon in the course of the development of the record of warrantability assessment and damages analyses from which the Registrar acquired his belief that the Appellants’ are disentitled to qualification for enrolment”.

10This motion was addressed at the beginning of the hearing on December 2, 2024. After he made submissions on the motion, I inquired whether appellants counsel could make a list of the documents he is seeking to have produced. Counsel said that he could make such a list and provide it to the Tribunal and respondents counsel by 1:00 p.m. on December 2, 2024. Later on, counsel requested to change the time for submitting the list to 2:00 p.m. on December 2, 2024.

11Tarion’s counsel agreed that if the appellants list was provided by 2:00 p.m. on December 2, 2024, that the balance of the afternoon of December 2, 2024 would be needed to review the list.

12As a result, I ordered that the appellants provide a list of documents they are seeking to the Tribunal and to Tarion by 2:00 p.m. and that the hearing would continue on December 4, 2024, being the next day scheduled for this hearing.

13I advised both parties that when the hearing resumes on December 4, 2024, I will hear submissions from the respondent as to whether sufficient time has been given to review the appellants list of requested documents, and as to whether the respondent is in a position at that time to respond orally to the motion or wishes to file responding material.

14When the hearing resumed on December 4, 2024, Tarions counsel advised that Tarion has had sufficient time to review the appellants list of requested documents, and that Tarion had filed responding motion materials. The responding motion material contained Tarion’s submissions including a Schedule A list of the specific disclosure requested by the appellant in the appellant’s list.

15In response to the appellant’s request for time to file written reply submissions, the appellant was given until the morning of December 5, 2024 to file written reply submissions.

ORDER ON APPELLANTS DISCLOSURE MOTION

16On December 5, 2024 I delivered an oral decision on the appellants disclosure motion, with reasons to follow. The order made and reasons are set out below.

Appellants General Request for Disclosure

17As originally submitted, the appellants disclosure motion was framed so broadly as to not identify with any specificity what documents requested would be relevant to the issues in this hearing. Rule 9.1 of the Licence Appeal Tribunal Rules, 2023 (“Rules”) allows the Tribunal to make an order to when the Tribunal considers the subject matter of the order to be “relevant to the issues in dispute in the proceeding.”

18After being allowed an opportunity to do so in writing, the appellant submitted a list of documents being requested which is preferred by even broader general language, followed by a more particularized list of 15 documents or categories of documents (the “List”). Again, the general language prefacing the list, is so broad as to be unhelpful in describing relevance to this hearing of the appellants broad disclosure request.

Appellants Particularized Request for Disclosure

19However, the list of 15 documents submitted by the appellant is more specific and helpful in identifying relevancy. Both parties made submissions on the list.

20I order disclosure of the following items is ordered by Tarion by January 6, 2025. The balance of the appellant’s disclosure motion is dismissed. No order is necessary with respect to Items 1, 2, and 14 as the appellants are satisfied with Tarions response to these items.

Appellants List Order Made/Reasons

Item 1

Appellant is satisfied with Tarions response. No order necessary.

Item 2

Appellant is satisfied with Tarions response. No order necessary.

Item 3

All communications with the Columba Terrace owner regarding Exterior Stair Claim

Tarion to produce any document(s) that explain why Exterior Stair Claim was found not to be warranted and later found to be warranted, if this occurred. At this stage in the hearing such documents appear to be relevant to the issues.

Item 4

All communications with Columba Terrace owner regarding Bubble Window Claim

Tarion to produce any documents that explain why Bubble Window Claim was found not to be warranted and later found to be warranted, if this occurred. At this stage in the hearing such documents appear to be relevant to the issues.

Item 5

All Conciliation Request Forms submitted in respect of warranty related complaints or claim forms submitted by the owners of Columba Terrace

Tarion to produce the email request from the owner on November 4, 2019 which resulted in the conciliation inspection letter at Tab 23 of the Respondent’s Document Brief.

At this stage in the hearing this appears relevant to the issues.

Item 6

All Conciliation Request Forms submitted in respect of warranty related complaints or claim forms submitted by the owner of Columba Royal Street

The 30 day claim document has already been produced in Tab 69 of Respondent’s Document Brief.

Tarion to produce an email from the owner on June 2, 2020.

At this stage in the hearing this appears relevant to the issues.

Item 7

The contemporaneous warrantability analysis which formed the basis for Tarion’s reversal of its September 22, 2020, assessment of the Bubble Window Claim as not warranted and June 9, 2022, assessment of the Bubble Window Claim as constituting a warranted major structural defect

Request dismissed.

I accept Tarion’s submission that there is no document called a “contemporaneous warrantability analysis” beyond what is written in the Warranty Assessment Report (“WAR”). The appellant has not established otherwise.

Item 8

The contemporaneous warrantability analysis which formed the basis for Tarion’s reversal of its September 22, 2020, assessment of the Exterior Stairs claim as not warranted and June 9, 2022, assessment of the Bubble Window Claim as constituting a warranted major structural defect.

Request dismissed.

I accept Tarion’s submission that there is no document called a “contemporaneous warrantability analysis” beyond what is written in the Warranty Assessment Report (“WAR”). The appellant has not established otherwise.

Item 9

Any written request, recommendation, authorization or instruction to initiate the obtainment of remedial cost estimates in respect of the Exterior Stairs Claim ten months in advance of issuance of the related June 9, 2022, warrantability assessment.

Request dismissed.

The documents already produced at Tab 38 of the Respondent’s Document Brief appear responsive to this request.

Item 10

Any written request, recommendation, authorization or instruction to extend any of the Thirty Day, Year End and Second Year Forms submitted by the owners of Royal Street through the exercise of discretion granted to the Deputy Registrar or Registrar under regulation 892 together with any analysis of the regulatory authority to do so.

Request dismissed.

The documents already produced at Tabs 64 and 65 of the Respondent’s Document Brief appear responsive to this request regarding the 30-day claim; Tab 18, specifically pages 6-7 of Respondent’s Document Brief, appear responsive to this request regarding the Year End Claim.

I accept Tarion’s submission that the Second-Year Claim is not at issue in this appeal. The appellant has not established otherwise.

Item 11

Any written request, recommendation, authorization or instruction to assign remedial scope preparation in relation to the Columba Terrace water penetration claim to Burke’s Restoration.

Tarion is ordered, on consent of Tarion, to produce the correct document for Tab 36 of the Respondent’s Document brief.

Tarion acknowledges that it inadvertently inserted the wrong document at Tab 36 and has undertaken to produce the correct document.

Tarion to produce the email dated July 28, 2022 where Tarion asked Burkes Restoration to review the AD Engineering Report, attend the site and prepare a quote.

Item 12

Any written communication, authorization or instruction to Burke’s Restoration to triple the remedial scope reflected in a remedial engineering recommendation regarding the Columba Terrace Foundation.

Request dismissed.

I accept Tarion’s submission that there is no such document.

Further, on this motion the appellants have not established that Burke’s Restoration “tripled the remedial scope”. Still further, this can be dealt with in questioning at the hearing.

Item 13

Any written communication, rationale, authorization or instruction to fund unwarranted and gratuitous work on and alternations to aspects of Columba Terrace requested by its owner.

Request dismissed.

I accept Tarion’s submission that there is no such document.

Further, on this motion the appellants have not established that Tarion funded “unwarranted and gratuitous work”.

Item 14

Appellant is satisfied with Tarions response. No order necessary.

Item 15

Any written communication, rationale, authorization or instruction to dispense with regulation 892 requirement that both a repair invitation and a remedial scope be included in a warranty assessment report in respect for the June 9, 2022, Royal Street conciliation assessment report.

Request dismissed.

I accept Tarion’s submission that there is no June 9, 2022 Royal Street conciliation assessment report. The appellant has not established otherwise.

21Given the result of the motion and based on the availability of the parties and their witnesses, the hearing will to resume on February 18, 19, 21, 24, 26, and 28, 2025, at 9:30 am each day by videoconference.

PRELIMINARY ISSUE–AGREEMENT ON THE ADMISSION OF DOCUMENT BRIEFS

22Tarion proposed that its book of documents and supplementary book of documents submitted for the hearing be entered as exhibits in their entirety on the basis that Tarion’s business records contained in the briefs were made in the ordinary course of business, and authenticity is not in issue.

23The appellants consented on the basis that their consent was for authentication purposes only, and on the basis that the document brief of the appellants submitted for the hearing also be marked as an exhibit in its entirety.

24Based on the agreement of both parties, the document briefs were admitted into evidence.

PRELIMINARY ISSUE – AGREEMENT ON THE ONUS OF PROOF

25At the beginning of the hearing, both parties agreed that the burden of proof is on the respondent. This necessitated a re-statement of the issue in dispute from that expressed in the Tribunal’s August 7, 2024 Case Conference Report and Orders which is “The issue to be determined is whether the appellant has proven on a balance of probabilities that he should be entitled to qualification for enrolment under the Act”.

ISSUE

26The issues to be decided in this hearing are:

i. whether the Registrar has established on a balance of probabilities its reasons for revocation/refusal, and

ii. If so, whether the Tribunal should direct the Registrar to carry out the Registrar’s proposed action or substitute its opinion for that of the Registrar.

RESULT

27Having considered all of the evidence, and for the reasons that follow, I direct the Registrar to carry out the Registrar’s Notices of Proposal dated June 6, 2024 issued to each appellant. No costs are awarded.

ANALYSIS

The Legislative Regime

After February 1, 2021 Builders/Vendors are Required to Apply to Enrol Homes in the Plan (“QFE”)

28Prior to February 1, 2021 builders of new homes in Ontario had to be registered with Tarion. After February 1, 2021 builders of new homes in Ontario are licensed by the Home Construction Regulatory Authority under the New Home Construction Licensing Act, 2017 (“HCRA”).

29However, after February 1, 2021 builders/vendors of new homes need to apply to enrol new homes in the Ontario New Home Warranties and Protection Plan described in s. 11(1) of the Act administered by Tarion (the “Plan”), formerly known as Ontario New Home Warranties Plan. Section 11(1) of the Act continued the Plan under the name Ontario New Home Warranties and Protection Plan which is comprised of the warranties, protections, guarantee fund and compensation provided by the Act.

Information Sharing between Tarion and HRCA

30Section 2.0.2 of the Act provides for mandatory information sharing by Tarion with the Minister, the HRCA regulatory authority and prescribed persons in accordance with the regulations.

QFE Requirement for Builders/Vendors Prior Offer to Sell/Construct New Home

31Section 10.1 of the Act provides that a vendor shall not sell or offer to sell a home unless the vendor is:

a. Is licensed as vendor under the New Home Construction Licensing Act, 2017;

b. has provided the Registrar with the particulars that the Registrar requires and in the manner that the Registrar requires;

c. Has paid the Registrar the fee that the Registrar requires;

d. Has complied with the other requirements, if any, that are prescribed;

e. Has received confirmation from the Registrar that the home qualifies for enrolment in the Plan, if construction of the home has not commenced, or has been enrolled in the Plan, if construction of the home has commenced; and

f. Has provided the registrar appointed under s. 35 of the HRCA with a copy of confirmation that the home qualifies for enrolment in the Plan or has been enrolled in the Plan as set out in (e) above.

32Section 10.2(1) of the Act provides that a builder shall not offer to enter into a construction contract unless the builder is:

a. Licensed as a builder under HRCA; and

b. Has complied with the other requirements, if any, that are prescribed.

33Section 10.2(2) of the Act provides that a builder shall not offer to commence constructing a home unless the builder has complied with s. 10.2(1). Section 10.2(3) of the Act provides that a builder shall not enter into a construction contract unless the builder is licensed as a builder under HRCA, has notified the Registrar of the intention to commence construction, has provided the Registrar with particulars that the Registrar requires and in the manner that the Registrar requires, has paid the Registrar fee, has complied with the other requirements, if any, that are prescribed, has received confirmation from the Registrar that the home has been enrolled in the Plan, and provided the registrar appointed under s. 35 of the HRCA with a copy of the confirmation received from the Registrar that the home has been enrolled in the Plan. Section 10.2(4) provides that a builder shall not commence constructing a home unless the builder has complied with the requirements set out in 10.2(3).

34Section 10.3 of the Act provides that a vendor or a builder of a home that has not been constructed may apply to the Registrar for a determination as to whether the home qualifies for enrolment in the Plan.

The Registrar’s Duty to Determine QFE Includes Refusal – s. 10.3(4)

35Section 10.3(4) provides that the Registrar shall, subject to s. 10.6, determine whether to grant it or to impose conditions that must be satisfied before the Registrar makes a determination that a home qualifies for enrolment in the Plan or before the Registrar enrols a home in the Plan. The Registrar may consider the past and present financial position or conduct of the applicant, an interested person in respect of the applicant or any other prescribed person.

36Section 10.3(5) provides that any conditions prescribed under clause 23(1)(b.4) must be satisfied before the Registrar makes a determination that a home qualified for enrolment in the Plan, in order for a home to continue to qualify for enrolment in the Plan, and before the Registrar enrols a home in the Plan.

37The prescribed conditions that must be satisfied before the Registrar makes a determination that a home qualifies for enrolment in the Plan are set out in s. 2 of Reg. 638 and in s. 3 for a home to continue to qualify for enrolment in the Plan.

38The prescribed conditions under s. 2 include:

“5. The applicant shall provide the Registrar with all necessary assurances, as determined by the Registrar, that the vendor and builder have complied or will comply in all material respects with their obligations under the Act, the New Home Construction Licensing Act, 2017, other applicable law, the vendor agreement, the builder agreement, any other agreement with the Registrar and the policies, rules and directives of the Registrar. (emphasis added)

9. The applicant shall provide the Registrar with information satisfactory to the Registrar that the applicant, the proposed vendor or builder and any other interested persons are qualified and suited for the work they will do in connection with the homes applied for having regard to prior conduct, including history of claims made, claims resolved, claims paid by the Corporation, chargeable conciliations and after-sales service. (emphasis added)

10. The applicant shall provide the Registrar with confirmation that the applicant has agreed, in a form determined by the Registrar, that the applicant shall, upon receipt of a list of deficiencies in the construction of the home that must be resolved to bring the home into compliance with the Act and applicable law, resolve the deficiencies within a reasonable period of time.” (emphasis added)

39The prescribed conditions under s. 3 include:

“2. The vendor and builder of the home must each have complied in all material respects with their obligations under the Act, the New Home Construction Licensing Act, 2017, other applicable law, any existing or prior vendor agreement, any existing or prior builder agreement and any other agreement with the Registrar and with the policies, rules and directive of the Registrar. (emphasis added)

3. Neither the vendor nor builder of the home may have been subject to a material change since the application for qualification for enrolment was submitted that, in the determination of the Registrar, is likely to adversely affect the sale, transfer, construction, financing, completion and after-sales service of the home or of the type of home.” (emphasis added)

40Section 1 of Reg. 638 defines “material change” in s. 1(c) to include “a significant change in information concerning the servicing of warranties or protections for homes that are proposed by or that are the subject of a contract with the applicant…” (emphasis added)

41Under the transition provisions set out s. 16 and 17 in Reg. 627, any term, condition or agreement with Tarion existing before February 1, 2021 is deemed to continue to apply.

42In addition to the terms of any agreements with Tarion, a builder/vendors obligation to indemnify Tarion for losses is required by s. 13 of Reg. 627, together with an administration fee to Tarion equal to 15 per cent of the amount that its paid out under s. 14 and, interest at the rate of 1.5 per cent per month, calculated daily, on all amounts that the vendor or builder owes to Tarion, starting on the first day of each month following the date of default in repaying the amounts owed until the amounts owed are repaid in full under s. 15.

43In addition to the terms of any agreements with Tarion, a builder/vendors obligation to comply with Registrar Bulletins or Directives is required by s. 1 of Reg. 637 which defines “builder obligations” to include the Act, an agreement with Tarion, a “Registrar Bulletin or Registrar Directive or otherwise…” and “vendor obligations” to include all indebtedness of a vendor to Tarion under agreement, a Registrar Bulletin or Registrar Directive or otherwise”.

The Registrar’s Authority to Revoke QFE – s. 10.4

44Section 10.4 of the Act provides that, subject to s. 10.6, the Registrar may suspend or revoke the determination that a home qualifies for enrolment in the Plan.

The Registrar’s Duty to Issue an NOP

45Section 10.6 requires the Registrar to notify an applicant for QFE in writing if the Registrar proposes to refuse to grant an application for QFE or revoke a determination that the home qualifies for QFE.

Right to Appeal to the Tribunal

46When Tarion issues an NOP, the applicant may request a hearing by the Tribunal in accordance with s. 10.6(4) of the Act.

47After holding a hearing under s. 10(8) of the Act, the Tribunal may order the Registrar to carry out the Registrar’s proposed action, or substitute its opinion for that of the Registrar. In addition under s. 10(9) of the Act, the Tribunal may attach conditions to its order or to a determination that a home qualifies for enrolment in the Plan or to the enrolment of a home in the Plan.

48Although the Act is consumer protection legislation and should be given a liberal interpretation, the onus is on the Registrar to prove on a balance of probabilities that the Registrar should be directed to carry out the NOPs.

Appellants Inability to Properly Construct and Service Warranties

49For the following reasons, I find that that Tarion has established on a balance of probabilities that the appellants have an inability to properly construct as demonstrated by two homes, 55 Columba Terrace, Sudbury (“Columba Terrace”) and 2759 Royal Street, Blezard Valley (“Royal Street”) for the following reasons.

Columba Terrace

50On October 21, 2015, 1499, even though it was not a builder licensed by Tarion at the time, entered into a detailed construction contract with the prospective homeowners to construct a residence for them in accordance with plans and specifications prepared by the owners’ architect. This home was enrolled with Tarion under 498. The price, including upgrades, totalled $1,312,171.08 (“the contract”). The contract specified a “Nudura Foundation”. I find that 1499 did not properly construct a Nudura Foundation.

51Based on the evidence of Dharmik Prajapati, a civil engineer at AD Engineering Group Ltd.,1499 did not construct the foundation in accordance with the Nudura system requirements or the relevant provisions Ontario Building Code. Mr. Prajapati visited the site at the request of Tarion on April 29, 2022. Mr. Prajapati observed gaps in the garage floor system and water penetration related to these gaps, through wall base flashing to be inadequate and not to the OBC. He observed masonry weep holes to be blocked in some areas and partially blocked at the interface between the masonry and the foundation wall, not to the OBC 9.20.13.5, and causing water penetration. Contrary to the Nudura system, he observed cementitious based parging and not the acrylic-based material recommended by the Nudura manufacturer. At various locations of the foundation, he observed evidence of water penetration including staining and efflorescence, observed that the drainage layer dimple board membrane was noted to be loose and not fastened with a termination strip leaving a gap which may allow water to infiltrate between the Nudura membrane and the dimple board. Mr. Prajapati also observed that the chain leader system and combined with lack of finished grade (to drain away from foundation wall) may contribute to water pooling close to the foundation wall. Mr. Prajapati’s on site water testing at multiple locations of the north wall foundation confirmed that the leaks were continuing at the basement storage foundation walls.

52Mr. Prajapati’s document review confirmed that initial leak occurred around May, 2018, a new leak occurred in February, 2019, new areas of water infiltration were observed through the basement storage foundation as of October, 2020, even after some repairs had been done by the Builder. After further repairs were mutually agreed upon, further water intrusion was reported on June 27, 2021.

53In his July 7, 2022 report, Mr. Prajapati found that water infiltration was noted through the basement storage foundation wall after on-site water testing. He noted that the parge coat is not the approved product recommended by the Nudura wall manufacturer.

54Mr. Prajapati recommended that the entire basement wall be exposed to ensure Nudura peel and stick membrane is applied with manufacture’s requirements. Mr. Prajapati recommended confirming that this membrane as well as its termination to the foundation wall to ensure that it has been sealed adequately for a complete waterproofing system.

55Mr. Prajapati recommended that the existing parge coat material be removed and replaced with the approved acrylic-based product recommended by the Nudura manufacturer. It is also recommended that a drainage layer against the foundation be installed as specified on the IFC drawings to drain the foundation weeping tile/drainage system. All remedial work is recommended to be carried out under supervision of the manufacturer’s representative.

56Mr. Prajapati also recommended that observed gaps between spray foam and foundation wall be sealed, weep holes plugged with mortar be cleaned to ensure their intended function, and the recessed base wall flashing be corrected to the OBC required minimum five mm projection.

57April 18, 2023 Mr. Prajapati did a follow up site visit at Tarion’s request to view accessible features after Burke’s Restoration made multiple destructive openings to facilitate Mr. Prajapati review. At that time Mr. Prajapati reported that he observed that the topping at wall interface was not sealed previously, and recommended that this gap be sealed with exterior grade caulking suitable for the application. Membrane type throughwall flashing did not meet the requirements of OBC 9.20.13.5(b) because flashing did not extend five mm beyond the outer face of the building element. Mr. Prajapati reported that based on his observations on the north wall and discussions with the owner(s), it was suspected that similar conditions exist throughout the dwelling and that this throughwall flashing should get addressed elsewhere for a functioning building envelope.

58Mr. Prajapati noted in his report that the remainder of the home’s foundation waterproofing is scheduled to be completed, and once this waterproofing is completed, it is recommended that the basement areas be monitored for any water infiltration through the throughwall flashing areas. Mr. Prajapati was also asked to inspect and review the conditions of the foundation weeping tile that was now exposed. He reported that he found the material around the weeping tile of this exposed location appears to contain excessive fines and potential traces of organic material contrary to the OBC 9.14.3.2 and 9.14.3.3. Mr. Prajapati reported that since the waterproofing is scheduled to be completed for the rest of the dwelling, it is recommended that the foundation weeping tile be removed and replaced (in compliance with the Ontario Building Code requirements) while carrying out the waterproofing work.

59Mr. Prajapati’s delivered a third report dated November 15, 2024 in reply to T. Smith Engineering Inc.’s report dated October 28, 2024. Mr. Prajapati reports that he understands that the entire membrane was removed and replaced on site with new in accordance with the manufacturer’s requirements in the areas of concern, which he opines is the correct approach rather than the local patch repairs suggested by Mr. Smith. Mr. Prajapati also reports that the final finished grading to his understanding was never completed to the site. It was suggested to address this as part of the overall scope along with addressing the base of the chain leader system to help drain water away from the foundation walls.

60Both Messrs. Prajapati and Smith agree that the OBC requires the 5 mm extension of the throughwall flashing. Although Mr. Smith testified that this is rarely installed on new homes because homeowners don’t like the way it looks, I find this does not absolve the Builder of the requirement to install it in compliance with the OBC.

61I give little weight to the balance of Mr. Smith’s report for the following reasons.

62Mr. Smith did not inspect the Columba Terrace property at any time. His report was made October 28, 2024 after the warranty work on the foundation had been completed by Tarion.

63Mr. Smith was asked in his report to opine on the appropriateness of remedial measures and the expected cost. In cross-examination Mr. Smith confirmed that he is aware that Columba Terrace was to have a Nudura foundation system and that if a Nudura system is used, he would expect all the elements of the system to be used. It is clear from Mr. Prajapati’s report that not all of the correct elements of the Nudura system were used by the appellants.

64Although Mr. Smith estimated he would expect the repairs to cost between $20,000.00 and $40,000.00, having not seen the site at any time and having not performed any on-site testing, there is little factual basis for his estimate or for his opinion that deficiencies in site grading and design and installation of the chain-fall rainwater leaders resulted in the failure.

65Lastly, Mr. Smith confirmed that he doesn’t perform any contracting and that the if conditions are found with the foundation system that are not compliant with the manufacture’s instructions or the OBC, then a judgment call would have to be made as to how to best repair. The repair would also depend on whether the goal is to stop the leakage or if the goal is to make the construction compliant with the OBC. In the end, Mr. Smith conceded that his understanding of the goal here was to address “acute leakage” and not to make the home completely compliant with the OBC.

66Gary Burke, President of Burke’s Restoration Inc. gave testimony indicating that the Nudura foundation was not constructed properly. Mr. Burke, a contractor for some 45 years, testified that his company did the remedial work on the foundation at Columba Terrace. Mr. Burke testified that he was asked by AD Engineering to look at their report, meet with the homeowner, walk through, and give an estimate for repairs to the Columba Terrace home to fix the leaking foundation and issues with the masonry. He inspected the complete exterior, inside garage and the finished area below the garage, a storage area and testified with the aid of photographs he took in August, 2022, filed. Mr. Burke testified that the area below the garage had water damage on the wall and ceiling, there was evidence of water bleeding down, leaving staining and efflorescence. Mr. Burke observed the suspended deck at the back of the home and found there was supposed to be a staircase there but it was missing. Mr. Burke photographed a bag of P-151 compound left on site and saw that parge cement coloured coating had been trowelled on to the foundation, on top of the waterproofing. This is not the product Nudura recommends to coat their waterproofing. The parging was deteriorating, breaking down, falling apart. He photographed an area where the waterproofing was exposed. Mr. Burke saw weeping holes that were clogged instead of being open to allow water to drain out. Mr. Burke testified that he took a shovel and checked below grade. There should have been a plastic drainage board attached with a transition strip to keep it flush to the wall but there was not. The black drainage board had pulled away from the wall and there was dirt and debris behind it. There was a white mesh covered not very well with parging and it was exposed. Mr. Burke noted that Columba Terrace does not have a downspout but has a chain for the water to run down to the ground. He understood these should be re-done and put in the ground so that the rain can drain away.

67Mr. Burke submitted a quote to Tarion in September, 2022 and a work schedule based on the recommendations from AD Engineers for his work which included excavation of the north, east and west elevation, cleaning of foundation walls, removal of existing parge coat, application of Nudura parge coating as per manufacture’s installation guidelines, application of Nudura peel and stick membrane, Nudura drainage board, removal and replacement of weeping tile and gravel, removal and reinstallation of existing chain leader system after backfill and grading as per engineers, remove damaged drywall and replace with new painted drywall in lower level storage room, work on masonry flashing and weeper on east and north garage exterior wall. The total cost was estimated at $111,829.50. When the work did not proceed until December, extra charges were made because the work was done between December, 2022 and January, 2023 and the work site had to be winter proofed so that the crew could work in the cold temperatures. Mr. Burke testified that this work was quoted and performed based on engineer’s recommendations as to repair method and his knowledge of how to accomplish this work.

68Mr. Burke said that the excavation necessary turned out to be larger than first expected because the weeping tile was 14 feet deep and he had to make changes as the work went along and Tarion was kept advised. Mr. Burke said he had to work with the Nudura representative because different materials are used for cold weather and warm weather installations and Nudura had to approve the materials.

69During the work, Mr. Burke found other issues. There was no drainage board originally installed all the way down to the footing and there should have been to protect the foundation. Nudura and the OBC require this. The drainage board had only been applied to the top few feet. The wall had to be stripped of its parging and some product had been used which melted the foam block and it had to be scraped off. The weeping tile did not have gravel over it and the pipe had fine silt in it. Burke’s Restoration had to hand dig around the water drain pipe going out to the street. Large stones had to be removed because in Mr. Burke’s view, they should not be backfilled against the house as the pipes can easily be crushed. The driveway which had to be excavated to gain access to the foundation and later the driveway had to be re-filled and compacted to prevent it caving in later.

70It is clear from the evidence of Mr. Burke, when taken together with the evidence of Mr. Prajapati, that the Nudura foundation was not properly constructed at Columba Terrace by the appellants.

71In support of his submission to the contrary, Mr. Cusinato submitted a letter dated June 15, 2016 from Dan Daoust indicating that Kerry Boyuk of Cusinato “…has constructed the NUDURA integrated Building Technology Insulated Concrete Form System supplied to this site in accordance with the most up-to-date version of NUDURA Installation Manual (as downloaded from their website at www.nudura.com) subject to caveat as Dictated by NUDURA Corporation. policies”. I give this letter no weight given that Mr. Cusinato admitted in his testimony that Mr. Daoust is a sales representative of Simcoe Building Centre, the Nudura system referred to in his letter is the ICF block form but not the pouring of the concrete into the block forms, application of the membrane on to the forms, or installation of the drainage system. Also, Mr. Cusinato said that Mr. Daoust inspected prior to the pouring of the concrete and only as to the installation of the Nudura blocks. The damproofing and weeping tile are installed weeks later. Neither Mr. Daoust or Mr. Boyuk testified at the hearing.

72Gerald Premachandran, manager at Tarion, explained the handling of the warranty claims for Columba Terrace, that Tarion was guided by the input given to it by its engineer, Burke’s Restoration and others in assessing the foundation water issues. He confirmed that Tarion allowed opportunities for the appellants to make repairs, which were unsuccessful, and that after so many years Tarion had to backstop the appellants warranty and spend the money to make the necessary repairs. Mr. Premachandran also identified the invoices paid by Tarion to investigate and complete repairs. The appellants were kept advised during the process and chose not to satisfy the warranty claims with payment, leaving Tarion no choice but to hire Burke’s Restoration to make the necessary repairs.

Appellants Chain Water Leader Theory

73Much of Mr. Cusinato’s evidence was directed toward his theory that the water penetration issues at the foundation were caused by the chain water leaders that the plans specified in place of downspouts. Mr. Cusinato who has experience in construction but does not have a post-secondary degree in engineering, architecture or an engineering or architecture CET designation, testified that the chain fall water leaders are bad design and against the OBC. The OBC statement was contradicted by the appellant’s engineer Mr. Smith who reported that the OBC does not prohibit the use of chains but does require the water to be directed away at the base. Site meeting reports show that this theory was raised by Mr. Cusinato at various site meetings and rejected by the homeowners architectural firm. Mr. Cusinato testified that they are wrong.

74Mr. Smith stated in his report that deficiencies in site grading and the design and installation of the chain-fall rainwater leaders resulted in a failure to drain surface water away from the foundation. I give Mr. Smith’s opinion little weight for the reasons set out above. Again Mr. Smith did not see the condition of the site grading or foundation at any time from 2019 to 2024 and conducted no testing.

75With respect to whether the chain fall water leaders caused the water issues with the foundation, I prefer the evidence of Mr. Prajapati who has a masters degree in engineering, visited the site in April, 2022 and again in April, 2023, did testing, was familiar with the repairs made by Burkes Restoration, and completed a total of three reports for Tarion over a period of more than two years. Mr. Prajapati reviewed Mr. Smith’s report and made a reply report dated November 15, 2024. In this third report and in his testimony, Mr. Prajapati confirmed the cause of the leakages through the foundation walls, specifically that the leakages through the foundation walls prove defects in the membrane providing pathways towards the interior space. Mr. Prajapati reports that the final finish grading to his understanding was never completed for this site and suggests addressing this as part of overall scope along with addressing the base of the chain leader system to help drain water away from the foundation walls. Mr. Smith testified that he was not given Mr. Prajapati’s third report.

76Taken in totality, the weight of the evidence does not support the appellants theory that the chain water leaders was the principal cause of the failure of the foundation or any other construction issues at Columba Terrace and I so find.

77I find that there is no evidence before me which establishes that the chain fall water leaders are “bad design” in respect of this home.

Missing Staircase and Bubble Window Construction Issues

78Tarion also paid the owners of Columba Terrace compensation for not completing the construction of the exterior staircase described in the contract and for water penetration issues with the bubble window that was installed by the appellants. The appellants, despite knowing about these warranted items, failed to service these warranties and Tarion ultimately backstopped the appellants warranty by making payment to the homeowners when the appellants failed to satisfy them. These amounts are included in the total $236,622.41 owing as set out in the NOPs.

Royal Street

79On September 24, 2018, 1499, even though it was not a builder licensed by Tarion at the time, entered into an agreement with the prospective homeowners to construct a residence for them in accordance with the agreement. This home was enrolled with Tarion under 498. The price, including upgrades, totalled some $600,000.00 (“the Royal Street contract”). The Royal Street contract specified ¾ inch hardwood floors throughout part of the main floor, hardwood staircase. I find that 1499 did not properly construct the hardwood floors.

80John Keric, a certified flooring expert, inspected the hardwood flooring on two occasions, and found there was visible movement and the movement caused the squeaking noise to come from when walked on. Mr. Kirec described these conditions as objectionable, repeatable and widespread. Mr. Keric took photos, measurements and ruled out other causes such as humidity in the home, and moisture content in the floor and improper maintenance. After further investigation, he concluded that there was inadequate attachment between the floor and the subfloor and while the fastener spacing was more or less to the manufacturer’s recommendations, the length of the fasteners used was inadequate and inconsistent. This he confirmed by viewing the exposed fasteners from below in the basement. Mr. Kirec concluded that the movement was caused by the flooring being insufficiently anchored to the subfloor, allowing the movement to occur.

81After advising the builder of the warranty for this item, and after opportunities to repair the flooring, the appellants did not repair or reach a satisfactory payment arrangement with the homeowners. Tarion had to backstop this warranty and paid the homeowners compensation for the hardwood flooring warranty.

82Paul Valenti, a Tarion manager of warranty services, testified about the warranty start date and the claims filed by the homeowners with Tarion. The claims were handled differently because the appellants did not provide the homeowners with the required Tarion package but ultimately Tarion warranted various claims in addition to the hardwood flooring including dented garage door, defects in walls, defects in paint application, broken case of tiles, touchups on hardwood stairs, missing baseboard in kitchen, crooked tile in basement, hot water tank vibration causing shaking and rattling pipes, repair and replace sod, grading sloping toward foundation wall and cladding material not meeting the minimum requirement above grade, sliding door misalignment, installation of air conditioning unit not as per the agreement of purchase and sale, cement residue on garage doors.

83Mr. Valenti identified the various invoices Tarion had to pay for investigation and other costs related to back stopping these warranties including compensation paid to the homeowners, all as detailed in the NOPs.

Tarion Resolved the Warranties by Payment

84I find that Tarion resolved the warranties on Columba Terrace and Royal Street by payment. After some unsuccessful repair attempts at Columba Terrace, and after failing or refusing to honour the Builder warranties as found by Tarion at both Columba Terrace and Royal Street, Tarion had to back stop the Builder’s warranties on these two homes. The amount spent by Tarion for Columba Terrace is $236,622.41 and $114,671.23 for Royal Street as of the date of the NOP’s. All amounts are supported by invoices, filed by Tarion. The amounts for which Tarion is entitled to payment under the appellants indemnification agreements includes administration fees and interest.

85Ada Mai, an experienced underwriter and manager employed by Tarion reviewed and explained the contractual agreements both appellants signed with Tarion. In summary, Ms. Mai testified that the appellants agreed in writing to indemnify Tarion if Tarion has to incur cost in order to back stop the appellants’ warranties, agreed to Tarion adding a 15 percent administration fee, and interest at 18 percent. Additionally, the appellants agreed in writing to comply with the legislation, including Tarion’s builder bulletins, and that these agreements form part of the appellants conditions of registration. Mr. Cusinato in his testimony admitted that the appellants had signed the agreements with Tarion.

86Ms. Mai testified that Tarion had incurred costs to back stop the warranties of both appellants in the total amount of $351,293.64 as at the date of the NOPs. Interest continues to accrue at the rate of 18 percent until paid.

87Although the appellants are of the view that the amount spent by Tarion to resolve the warranties is “unreasonable and excessive”, I disagree. The evidence of Mr. Prajapati establishes that the engineering investigation and assessment of the construction issues related to Columba Terrace was prudently undertaken by Tarion. This was confirmed by the evidence of Gary Burke, President of Burke’s Restoration, an experienced contractor who was involved in most costly of the repairs, Gerald Premachandran who issued the ultimate reports finding the deficiencies to be warranted, and Paul Valenti and Ada Mai who spoke about the invoices Tarion paid and the addition of administration fees and interest. The construction issues with Columba Terrace arose in 2018 and were investigated and were not resolved by Tarion with payment until many years later. The appellants were given many opportunities to resolve the warranted items and despite some repair attempts were unwilling or unable to do so. Mr. Cusinato testified that he felt he should not have to do any more repairs because the homeowners owed him money.

88With respect to Royal Street, the evidence of Messrs. Kirec and Valenti establishes that the amount spent by Tarion to resolve this warranted item is reasonable. Again, the appellants were given many opportunities to resolve the warranted items and failed to return to the property or to satisfy the warranty with work or money. Although Mr. Cusinato testified that he was not allowed by the owners to come back to their home, I am not satisfied that there is sufficient written evidence that the homeowners prevented Mr. Cusinato from returning to the property or from making a monetary arrangement with respect to the warranty work such that the owners should be disentitled to the warranty as found by Tarion.

89I have found the amounts spent by Tarion to resolve the warranted items are reasonable in the context of this appeal. However, I note that it appears that the proper forum for the appellants to dispute the warranted items and their proposed resolution by Tarion is the Builder’s Arbitration Forum, a process that Mr. Cusinato testified he was aware of and had participated in to some extent.

Appellants Failure to Indemnify Tarion As Required by Agreements and Law

90Ms. Mai explained that the NOPs were issued after a review following 1499’s application to enrol a total of 16 new homes with Tarion. Ms. Mai explained the risk assessment she and others at Tarion performed in reaching the decision that the NOPs should be issued. Ms. Mai expressed concern that the appellants had failed to pay the amount owing to Tarion which had reached $351,293.64 at the time of the NOPs and that this is considered by Tarion by Tarion to be a breach of the written agreements between the appellants and Tarion and also a material change within the meaning of the Regulation.

91The agreements signed by the appellants are clear and unambiguous.

92The appellants had a remedy open to them before the NOPs were issued. The appellants could have disputed the warranted items and the proposed resolution by Tarion at the Builder’s Arbitration Forum. Under the BAF process, the appellants could have made repairs or paid invoices under protest but chose not to do so as set out in the June 24, 2024 email from Tarion’s counsel to the appellants counsel, filed by the appellants.

Conditions

93I find that directing the Registrar to carry out the NOPs is the appropriate outcome. Tarion has established that the appellants have an inability to properly construct homes, service the warranties and have failed to indemnify Tarion in accordance with the written agreements made with Tarion and in breach of their obligations under Ontario Regulation 627/20.

94Further, the warranties found by Tarion with respect to Columba Terrace and Royal Street were properly warranted, damages have been incurred as set out in the NOPs, the appellants were not denied remedial access to either of the properties such as to disentitle the owners to warranty coverage, the amount paid out by Tarion on account of the warranties is not unreasonable or excessive and Tarion’s reports and assessment of the deficient items, their repairs and compensation required to remedy them are consistent and appropriate with the facts and circumstances established before me.

95In coming to this conclusion, I have considered that under s. 10(9) of the Act, the Tribunal may attach conditions to its order or to a determination that a home qualifies for enrolment in the Plan or to the enrolment of a home in the Plan and have considered whether or not I should do so here. I asked both parties for submissions on conditions.

96The Registrar submitted that no conditions would be appropriate in this case. Alternatively, the Registrar submitted that payment of the some $351,293.64 owing to Tarion as of the date of the NOPs should be a condition of QFE should I be of the view that QFE should be granted with conditions.

97The appellants made no submissions on conditions.

98Even imposing a condition of payment of the amount requested by Tarion is, in my view, unlikely to correct the appellants conduct as I have found it. The appellants have been found to have the obligation to indemnify Tarion for the amount owing and allowing QFE with payment as a condition would be to not require anything further of the appellants apart from the obligation they already have.

99Carrying on business in accordance with the Plan requirements is a key part of this regulated industry.

100The Plan and its requirements are clearly for the protection of consumers who must trust their builder/vendors to abide by the Plan so that their statutory warranties are respected and enforced by Tarion. Nothing in the evidence persuades me that the any condition would cause the appellants to comply with their obligations under the Plan, including their contractual obligations with the Plan, in the proposed new homes. I have already found that that the evidence brought forward by the Registrar, considered in totality, clearly establishes that the appellants past conduct disentitles them at this time to QFE for the proposed new homes.

101The demonstrated inability to properly construct, and properly service the warranties on the two homes which are the subject matter of this hearing, in addition to the appellants’ refusal to indemnify Tarion for the costs it reasonably incurred to back stop the appellants’ inability or unwillingness to service the warranties, is unlikely to be prevented in the future by any conditions on QFE.

102I have also considered the appellants submission that if they are not able to carry on the business of home building, this will effectively end the appellants family business. Economic impact is not a factor that I can consider. Such a consequence, it if occurs, is the result of the appellants past conduct over the last five years. The importance of the Plan, Tarion’s role in administering the Act, and the consumer protection aspects of the Plan and the Act, and the requirements of the Act and its regulations outweigh any consequence to the appellants who have chosen to do business in this regulated industry.

Appellant’s Request for Costs is Denied

103In closing submissions, the appellant requested costs of this appeal for the first time. In summary, particulars given included the appellant’s submission that Tarion acted unreasonably, frivolously, vexatiously, or in bad faith by advancing the Ashlar case as a precedent I should follow, refusing disclosure, only disclosing what helps Tarion, including refusal of emails to which Tarion was a party, calling witnesses who testified in bad faith, with the aid of leading questions, and a “script” such as Ada Mai, relying on witnesses such as Mr. Kirek who was “one-sided and evasive”, and by attributing incompetence and taking a “personal shot” at the appellants.

104Tarion submitted that no costs should be granted to the appellant because Tarion has not acted unreasonably, frivolously, vexatiously, or in bad faith in this proceeding within the meaning of Rule 19 of the Rules. Many of the appellant’s cost submissions are about the way the appellant was treated in the warranty process and show that the appellant is dissatisfied with the evidence given by Tarion’s witnesses. The evidence of a witness is not misconduct of the party calling that witness. Although the appellant submits that Ada Mai was reading from a script, in fact she had the book of documents in front of her which was reasonable given appellant’s counsel does not know how to operate the screen sharing features of video conference. Tarion also submitted that Tarion is not seeking costs but if it was, there has been conduct of the appellant which itself would warrant costs, such as its last minute disclosure motion on the morning of the first day of the hearing, attempts to introduce mid-hearing documents not disclosed, and putting forward additional legal authorities not given to Tarion on the morning that Tarion was to start closing submissions.

105I am not satisfied that there is any basis to find that Tarion’s conduct has risen to the level of acting unreasonably, frivolously, vexatiously or in bad faith during the conduct of the proceeding, as required by Rule 19 of the Licence Appeal Tribunal Rules for a costs award to be made. This is a high bar and the appellant has not met it.

106Tarion, as well as the appellant are entitled to advance whatever legal authorities they wish in support of their respective legal positions. Tarion did not refuse disclosure, and when ordered to produce documents did. There is no evidence before me that any of the witnesses testified in bad faith or that Ada Mai was following a “script”. The oral evidence of all of Tarion’s witnesses was tested in cross-examination by the appellant. I am not persuaded that any “personal shot” has been taken at the appellants. Consideration of the appellant’s past conduct in assessing the appellant’s application for QFE is part of Tarion’s legislated function and was necessarily part of this proceeding. None of this is conduct rising to the level required by Rule 19.

107I deny the appellants request for costs.

Conclusion

108I find that 1499’s applications for QFE for 16 homes should be refused, that 498’s 16 homes should have their QFE’s revoked, and that the NOPs should be carried out as written.

ORDER

109For the reasons set out above, pursuant to section 10.6(8) of the Act, I direct the Registrar to carry out the Registrar’s Notices of Proposal dated June 6, 2024 issued to each appellant. No costs are awarded.

Released: June 13, 2025

LICENCE APPEAL TRIBUNAL

__________________________

Avril A. Farlam

Vice-Chair