COURT FILE NO.: CV-20-48 DATE: 20240119

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Carlos Melo, and Andreia Melo Plaintiffs

- and -

Cornelius Hiebert, and Eva Hiebert Defendants

BEFORE: Lemay J.

COUNSEL: James Battin, for the Plaintiffs Manny Sohal, for the Defendants

HEARD: November 30, December 1 and 4, 2023.

REASONS FOR JUDGMENT

[1] The Plaintiffs, Carlos and Andreia Melo, purchased a home at 54130 Eden Line in Aylmer, Ontario (“the Eden Line property”). The home was purchased from the Defendants, Cornelius and Eva Hiebert. An Agreement of Purchase and Sale (“APS”) was entered into in mid-February, 2019 and the transaction closed on April 30th, 2019.

[2] The Eden Line property was a home that the Defendants had been constructing so that they could live in it. The Plaintiffs had attempted to purchase another home from the Defendants but had not been able to close the transaction because they could not sell their home in Woodstock in time. That home was on Peters Court (“the Peters Court property”) and was close to the Eden Line property.

[3] Prior to signing the APS, Mr. and Ms. Melo met with Robert Koppert, the real estate agent, at the property and toured it. Mr. Melo advised that he wanted a shop built behind the house and a laneway built to the shop. The purpose of this shop was so that Mr. Melo could work on cars, which is his hobby.

[4] A retaining wall for the driveway to the shop was discussed between Mr. Melo and Mr. Hiebert. The Plaintiffs now say that the retaining wall was both necessary and was always intended to be part of their APS with the Defendants. The Defendants say that the retaining wall would only have been built if it was necessary, and it was not necessary. That is one of the deficiencies that the Plaintiffs allege existed in the property when it was purchased.

[5] The APS was ultimately signed, with the assistance of Mr. Koppert, who acted for both the Plaintiffs and the Defendants on the transaction.

[6] The Plaintiffs moved into the property on April 30th, 2019. Shortly after they moved into the property, they noticed several other deficiencies in the property. There was water entering the basement that damaged both the carpeting and the drywall in the basement, the water system could not hold pressure or produce sufficient water and had to be re-installed, there were problems with the stones on the main floor fireplace and the washroom doors in the shower were not properly installed, which caused cracked tile.

[7] For the reasons that follow, I have determined that the Defendants are liable to pay the costs associated with the construction of the retaining wall. I have also determined that the Defendants are liable to pay the costs associated with the leak in the basement. The remainder of the Plaintiffs’ claims are dismissed.

Background

a) The Parties

[8] The Plaintiffs, Carlos and Andreia Melo have three children, who range in age from nine to fourteen. Mr. Melo works as a site supervisor in the commercial construction industry. In 2019, they were living in Woodstock, but they wanted more space to raise their family. As a result, they began looking for a house that had more land.

[9] In the fall of 2018, the Defendants, Cornelius (“Neil”) and Eva Hiebert lived in a home on Peters Court in Bayham Township. They are also the parents of young children. They were selling the Peters Court house and were planning on moving to the Eden Line property.

[10] The Melos bid on the Peters Court property. Mr. Robert Koppert was the listing agent for the property. During the sale of the Peters Court property, he acted for both the Melos and the Hieberts. However, the Melo’s bid for the Peters Court property was unsuccessful because it was conditional on the sale of their property in Woodstock, and that sale did not take place in time. As a result, the parties had been introduced to each other prior to the transaction that I have to review.

b) The Transaction

[11] After the Defendants had sold Peters Court, they moved into the Eden Line property. Mr. Koppert, the real estate agent, had a discussion with Mr. Hiebert about whether the Hieberts might be willing to sell their Eden Line property to the Plaintiffs. Mr. Hiebert indicated that they might be interested in selling the property.

[12] As a result, Mr. Koppert contacted the Melos and asked if they were interested in purchasing another property from the Hieberts. The Melos were interested in purchasing the property, and Mr. Koppert advised them that the price was $520,000.00. As a result, on January 27th, 2019, the Melos met Mr. Koppert at the Eden Line property and toured it. The house was, at this point, uncompleted. The work that had not been finished included the deck, which had not been built yet and other interior finishes.

[13] The Eden Line property is on an 80 by 300 foot lot and is on the north side of the road. The terrain around the property has many small hills. In Mr. Koppert’s words, the terrain in the area undulates. The Eden Line property itself is also on uneven ground.

[14] During the tour on January 27th, 2019, Mr. Melo advised Mr. Koppert that he wished to have a shop built on the northwest corner of the property, behind the house. Mr. Melo wanted the shop built so that he could work on his hobby of restoring and working on automobiles.

[15] There was some discussion about the sale of the property between the parties, and Mr. Hiebert was advised that Mr. Melo wanted to have a shop built at the back of the property. The price was increased by $70,000.00 to $590,000.00.

[16] On February 15th, 2019, Mr. Koppert, Mr. Melo and Mr. Hiebert met at the property and discussed the construction of the shop. On Mr. Melo’s evidence, there was a promise to build both the driveway to the shop and the retaining wall. On Mr. Hiebert’s evidence, a retaining wall would be built only if it was required, and one wasn’t required. I will analyze this evidence in the sections that follow.

[17] After Mr. Melo, Mr. Koppert and Mr. Hiebert met on February 15th, 2019 and discussed the terms of the sale, Mr. Koppert then drafted the APS on the basis of information that he obtained from both sides and his understanding of what the agreement between the parties was.

[18] The APS was signed by the Plaintiffs on February 16th, 2019 and the Defendants on February 20th, 2019. One change to the draft that Mr. Koppert prepared was made. The Plaintiffs wanted a washer and dryer included in the purchase price. The Defendants agreed to this, and the price increased by $1,000.00.

[19] The APS contains three clauses that are significant for the purposes of my consideration of this case. First, the standard provisions section of the agreement includes Article 26, which states:

26. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context.

[20] Then, in Schedule “A”, the following covenants were included:

Seller agrees to provide to the Buyer a suitable water potability certificate before closing. Lot to be final graded and ready for sod or seed

[21] Finally, Schedule “B” addresses the shop, or shed, that was to be included on the property. Since that schedule is a key part of the issues in this case, I will set it out in full:

Prior to close the Seller shall complete a 25 X 32' (800 sq ft)Shed on the property in the North West corner of the lot -Maximum height ceiling allowed under the local bylaws, low pitch truss. -Tin Finished inside and out

• Concrete floor
• 1 Man Door, 1 rollup door & 1- 4 X 4' Window installed
• Gas line and gas ceiling heater to be installed -100 amp underground service and wiring installed -Rough in wiring for hoist as mutually agreed upon by buyer and seller -Gravel driveway installed to shed

[22] Mr. Koppert typed these provisions out, based on his discussions with the parties. I should address two points. First, throughout his evidence Mr. Melo referred to this as a shop. Counsel for the Defendants argued that it was specifically referred to as a shed in the APS, as the parties were all aware that they did not want the municipality treating the building as a shop.

[23] I accept the Plaintiffs’ characterization of this as a shop for two reasons. First, the municipality would not require any variation of the building plan for the construction of a shop (or a shed) as long as it was below a certain size. Second, the parties both knew that this shop was being built for the construction and repair of cars. The APS includes a requirement for specific concrete for the hoist area. To the extent there is a difference between shop and shed, I accept that this was intended to be a shop, as it was for the repair and construction of cars. I will refer to it as a shop throughout these reasons.

[24] Second, there is the question of Mr. Koppert’s role in the preparation of this agreement. He testified that he only received $500.00 from Mr. Hiebert for his work in preparing the APS and in the negotiations. In my view, Mr. Koppert was acting as an intermediary between the Plaintiffs and the Defendants. Therefore, the fact that he prepared the APS does not assist either party in their arguments over who is responsible for any error or omission from the APS.

c) The Events After the Transaction Closed

[25] On April 30th, 2019, the Melos moved into the property. The retaining wall had still not been built at that point, and Mr. Melo was asking Mr. Hiebert regularly when the wall would be built. Indeed, Mr. Melo was asking about the retaining wall in the couple of days before the transaction closed. There was no real response from Mr. Hiebert.

[26] The Melos moved into the property on April 30th, 2019. That weekend, there was a significant rainfall. The Melos discovered that there was a significant leak in the wine cellar area of the basement, and that water was coming down the wall and pooling in the carpet. Text messages were sent by Mr. Melo to Mr. Hiebert. Mr. Hiebert responded to those text messages, and I will review those responses in my analysis below.

[27] Mr. Hiebert was not prepared to build the retaining wall, as he was taking the position that it was not required. However, Mr. Hiebert did send one of his people to inspect the water that was leaking into the basement. There was no real disagreement between the parties that there was an issue with the membrane around the front of the house.

[28] As the Melos began to discover problems with the property, they performed their own research. As part of this research, it came to their attention that the Municipality did not complete the final inspection report or issue the Residential Occupancy Permit until May 22nd, 2019. Except as authorized by the building code, section 11(1) of the Building Code Act, 1992, S.O. 1992, c. 23 prohibits anyone from occupying or using the property or permitting it to be occupied or used until the conditions under section 11 are satisfied. In this case, those conditions required an inspection and the issuance of the certificate.

[29] Ultimately, the Hieberts did not fix any of the problems with the Eden Line property. Since they purchased the house, the Melos have taken some steps to ameliorate the water coming into the house. They have also re-dug the well, fixed the water supply and built some of the retaining wall. The other deficiencies have not yet been remedied.

[30] They have also brought this action, claiming damages for the deficiencies that they found in the Eden Line property that are outlined above. I understand that there may have been other issues that the Plaintiffs are not claiming for. This action was part of a blitz list of virtual trials that was held in the Southwest Region, so I will begin by setting out the evidence.

The Evidence

a) The Documentary Record

[31] This is a simplified rules action and proceeded with affidavits as the examinations in chief of the witnesses. On November 24th, 2023, approximately a week before trial, I held a case management conference with the parties. I encouraged them to agree on a joint book of documents and to set out the uses of those documents.

[32] Counsel were able to agree on a joint book of documents, as well as agreeing on the basis that these documents were admitted. As part of the joint book of documents, counsel filed joint answers to the six questions set out by Lauwers J.A. in Girao v. Cunningham, 2020 ONCA 260, 2 C.C.L.I. (6th) 15 (at para 33). For my purposes, the key points are:

a) The documents are admitted to be true copies of the originals. b) The correspondence and other documents were all sent and/or received on or about the date set out in the document unless otherwise shown at trial. c) The content of the documents in the Joint Book of Documents are admitted for the truth of its contents.

[33] Counsel’s efforts between the November 24th case conference and the trial made the trial much more efficient.

b) The Testimonial Evidence

[34] There was a series of twelve affidavits that were filed in this case. Eleven of these affidavits were filed by the Plaintiffs, including one from each Plaintiff. The Defendants only filed one affidavit, which was a joint affidavit sworn by both of them.

[35] As part of the agreements about evidence, counsel for the Defendant advised counsel for the Plaintiff which witnesses he wished to cross-examine on their affidavits. The affidavits of witnesses who were not cross-examined were accepted as undisputed by both parties, and I have treated them as proven fact for the purposes of the record.

[36] The six laypeople who testified were:

a) Carlos Melo, one of the Plaintiffs; b) Andreia Melo, one of the Plaintiffs; c) Robert Koppert, the realtor who acted for both Plaintiffs and Defendants on the transaction; d) Kim Husted, a surveyor who, along with his staff, completed a survey of the Eden Line property; e) Cornelius (“Neil”) Hiebert, one of the Defendants; and f) Eva Hiebert, one of the Defendants.

[37] In weighing the evidence, I note that neither Ms. Melo nor Ms. Hiebert had very much direct knowledge as to the events giving rise to the transaction or the allegations in respect of the construction of the shop and the laneway to the shop. As a result, I do not view either Ms. Melo’s or Ms. Hiebert’s evidence as being of any assistance in resolving the issues in this case and I will not consider this evidence further with one exception. The exception is in respect of the deficiencies that were found in the home when the Plaintiffs moved in. Ms. Melo’s evidence assists in establishing the existence of those deficiencies.

c) Expert Evidence

[38] The Plaintiffs also sought to tender Mr. Leonard Girard as an expert witness, with his expertise being in civil engineering, which covers grading and retaining walls. The Defendants took no issue with Mr. Girard’s qualifications. However, disputed whether his report should be accepted by the Court based on when portions of the report were delivered.

[39] I dismissed the Defendant’s objections at the conclusion of the argument on the issue. I will now set out my reasons for doing so.

[40] Counsel for the Defendants is correct when he observes that the requirements under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 in respect of experts have changed. Those changes now require expert reports to be delivered at least three months before the pre-trial. Recent case-law on the issue has also indicated that the test for whether a late served expert report should be admitted is more stringent than it used to be, and that the onus to demonstrate that a late served expert report should be admitted rests on the party seeking to rely on the report. Agha v. Munroe, 2022 ONSC 2508, 23 C.C.L.I. (6th) 118.

[41] However, judges still have a discretion to admit a late served report. In this case, the chronology of events strongly supports the admission of Mr. Girard’s report. I start by noting that the report itself, which was one page, was served sometime in 2022. This was well before the pre-trial in this matter, which was held in October of 2023. Defendants’ counsel acknowledges receiving the report in a timely manner.

[42] However, Defendants’ counsel did not receive the four figures attached to the report until October 31st, 2023. This portion of the report was served late. The four figures are two photographs (one of the Eden Line property, one of the property next door), and two drawings that support Mr. Girard’s conclusions. The four figures are specifically mentioned in the text of the report.

[43] Defendants’ counsel did not raise this issue until after Mr. Girard had been sworn in as a witness. Indeed, it was Plaintiffs’ counsel who noticed the omission and sent the missing figures to Defendants’ counsel in October of this year. Counsel for the Defendants did not raise this issue directly with Plaintiffs’ counsel, he did not raise it at the pre-trial, and he did not raise it at the trial management conference that I held on November 24th, 2023.

[44] In my view, the Defendants have known the basis for Mr. Girard’s conclusions since they first received the report in 2022. Further, the fact that the four figures were missing would have been obvious from a cursory perusal of the report. As a result, the Defendants should have raised the Plaintiffs’ omission earlier, rather than waiting until trial to do so. Further, the Defendants did not identify any prejudice that they would suffer if the figures were admitted as part of the evidentiary record. Therefore, I dismissed the Defendants’ objections to the late delivery of portions of Mr. Girard’s report.

[45] This brings me to the expert evidence itself. Even though the parties took no issue with Mr. Girard’s qualifications, the Court still has a gatekeeper role in determining whether expert evidence is admissible. Therefore, I will briefly set out my reasons for accepting Mr. Girard as an expert qualified to give evidence in civil engineering.

[46] The test for admitting expert evidence is based on the criteria articulated in R. v. Mohan, 1994 SCC 80, [1994] 2 S.C.R. 9, 1994 SCC 80. Those criteria are:

a) Relevance; b) Necessity in assisting the trier of fact; c) The absence of any exclusionary rule, apart from the opinion rule itself; and, d) A properly qualified expert.

[47] In White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, [2015] 2 S.C.R. 182, the Supreme Court split the admissibility requirement for expert evidence into two distinct steps. First, a trial judge considers the Mohan criteria. Then the judge balances the potential risks and benefits of admitting the expert evidence.

[48] In this case, the evidence is necessary to help me understand whether a retaining wall had to be built. My conclusions on that issue will inform my conclusions on what the parties’ agreement was, and whether the Defendants are required to pay the Plaintiffs for the cost of constructing the retaining wall. The evidence is based on engineering principles and is, therefore, likely to be reliable.

[49] Mr. Girard is also a properly qualified expert. Mr. Girard obtained a Bachelor of Applied Science in Civil Engineering from the University of Windsor in 1971. His C.V. indicates that he has worked in the field of civil engineering ever since, both in hands-on roles and as a consulting engineer. At least some of this experience was with municipalities. Mr. Girard indicated that he has been qualified in the Superior Court as an expert on at least three occasions in the past. He is qualified to provide the expert evidence that I have determined is necessary to assist me in deciding this case.

[50] For these reasons, I determined that the expert evidence should be admitted.

Issues

[51] The evidence and arguments of the parties raise the following issues for me to determine:

a) Whether the APS should be rectified, or interpreted, to require the Defendants to pay for the retaining wall. b) Whether the Defendants are liable for the repairs to the water system, the damage to the basement as a result of the flooding and the other issues with the home. c) Whether the Defendants should be required to pay punitive damages on account of their conduct.

[52] I will address each issue in turn.

Issue #1- Rectification of the Contract for the Retaining Wall

[53] Counsel for the Plaintiff argues that I should apply the doctrine of rectification and should deem that the APS requires the Defendants to build a retaining wall for the Plaintiffs. In the alternative, counsel argues that the agreement is ambiguous and the phrase “gravel driveway installed” in the APS should be read to require the installation of a legally permissible driveway.

[54] The Defendant opposes both of these arguments. They argue that the doctrine of rectification should not apply because there is no fraudulent (or fraud-like) conduct on their part. They also argue that the language of the APS is clear and unambiguous.

[55] I accept the Plaintiff’s position on both issues. The doctrine of rectification can (and should) be applied in this case to read the APS to include the retaining wall. In the alternative, the APS is sufficiently ambiguous that a retaining wall is included as part of its’ terms in any event. I will deal with each issue in turn.

a) Rectification- The Legal Principles

[56] I was referred to a number of cases on the doctrine of rectification. The basic principles of rectification were set out in 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, 150 O.R. (3d) 481. At paragraph 2, the Court stated:

[2] Rectification is an equitable remedy available to correct a document that fails to accurately record the parties' true agreement. It is not available to correct an improvident bargain or to fill a gap in the parties' true agreement, even when the omission defeats what one (or both) of the parties was seeking to achieve. As an equitable remedy, it is also not available when the party seeking it does not have "clean hands".

[57] More generally, rectification is available in cases of either mutual mistake or unilateral mistake. In this case, it is a case of unilateral mistake, and the test is more onerous. In Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720, there were six requirements identified (at paragraphs 14 and 15) before rectification can be used in a case of unilateral mistake. Those requirements are:

a) The parties had reached a prior agreement whose terms are definite and ascertainable; b) The agreement was still effective when the instrument was executed; c) The instrument fails to record accurately that prior agreement; d) If rectified as proposed, the instrument would carry out the agreement; e) The party resisting rectification knew or ought to have known about the mistake; and f) Permitting that party to take advantage of the mistake would amount to “fraud or the equivalent of fraud”.

[58] In considering the facts of this case, it must also be remembered that parol (or extrinsic) evidence is generally inadmissible to vary or contradict the terms of a written agreement. However, it can be admitted for the purposes of rectifying that agreement. Chant v. Infinitum Growth Fund Inc. (1986), 55 O.R. (2d) 366 (C.A.). Parol evidence can also be admitted if the Court finds the existence of an ambiguity in the contract. However, in the latter case, the Court must also be careful as to the weight that is ascribed to the parol evidence. Briggs v. Durham (Police Services Board), 2022 ONCA 823, at para. 41.

b) Applying the Test for Rectification to These Facts

[59] In applying this test to the facts before me, I will deal with the first four criteria together and then I will turn and address the two criteria that relate specifically to a unilateral mistake.

The Prior Agreement

[60] The law is clear that the Court’s task is to restore the parties to their original bargain, and not to remedy either a change of heart by a party, or an error made by one party that was only recognized after the contract was signed. Hanley, at para. 35, Performance Industries Ltd. v. Sylvan Lake Golf and Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at para. 31.

[61] In this case, I am satisfied that the parties contracted for a retaining wall. In support of this conclusion, I start with the evidence of Mr. Hiebert. He testified that the parties had an agreement that a retaining wall would be built only if one was required. As a result, it is clear the parties contemplated the possibility of a retaining wall prior to signing the APS.

[62] Mr. Hiebert went on to testify that he was told that the retaining wall was not required by Barney, his excavator. In cross-examination, Mr. Hiebert confirmed that Barney was not an engineer, but an excavator and a firefighter. I do not accept Mr. Hiebert’s evidence on this point for several reasons:

a) Barney was not called as a witness, so the Court has no way of ascertaining whether this conversation actually happened. I am not even aware of Barney’s last name, although Mr. Hiebert testified that Barney worked for George Burnett Excavating. b) Both Mr. Koppert and Mr. Melo testified that the need for a retaining wall was obvious to them. I find Mr. Koppert’s evidence on this point particularly compelling because he was an independent party with no stake in the outcome of the case. Mr. Koppert was clear that a retaining wall for the driveway to the shop would be required, and that this was discussed between the parties before the APS was signed.

[63] In addition to these two points, there is the evidence of Mr. Girard. He is a civil engineer and, in preparing his report, he visited the property. He was quite precise in his testimony, which was that the standards of every municipality in the area would have required a retaining wall along this driveway because of the grade of the slope away from the house. For clarity, I should note that Mr. Girard is describing the slope from the house across the driveway to the property line between the Melo residence and the property next door.

[64] Mr. Girard testified that most municipal standards require a slope of 2 percent away from the peak of the driveway. In this case, without a retaining wall the slope would have been nearer to 10 percent. Without a retaining wall, there is a real risk that vehicles would slide across the driveway and over the property line, especially in inclement weather. The design, without the retaining wall, was unsafe.

[65] I prefer the evidence of Mr. Girard to that of Mr. Hiebert, and the hearsay that Mr. Hiebert proffered from Barney the excavator. The reasons for that should be self-evident, but I will briefly explain them. Mr. Girard is an expert in civil engineering and is well qualified to offer the opinions that he has. I have no idea what qualifications Barney the excavator has and, in any event, I only have Mr. Hiebert’s word that Barney thought that the retaining wall wasn’t necessary. Given the concerns I have with the inconsistencies in Mr. Hiebert’s evidence (as detailed elsewhere in these reasons), I am not even prepared to accept that he actually had this conversation with Barney.

[66] Mr. Girard has explained why the retaining wall is required, and the explanation makes sense. There is no direct evidence before the Court to contradict Mr. Girard’s conclusions. I accept his evidence.

[67] In addition to this evidence that the retaining wall was required, and that the parties agreed that the Hieberts would construct it, there is other contextual evidence that supports the conclusion that the parties had an agreement:

a) Other driveways in the same area have retaining walls, suggesting that the terrain required them. b) The value of the shop would have been considerably less than $70,000.00. Mr. Melo testified that he viewed it as being worth between eighteen and twenty thousand dollars given the way that it was constructed and the fact that the wiring was not approved. Mr. Hiebert testified that he did the electrical work on the shop himself. I conclude that the shop and the driveway (without the retaining wall) was worth considerably less than $70,000.00, and that the price ultimately charged included the retaining wall.

[68] For these reasons, I conclude that the parties had agreed, before the APS was signed, that the Hieberts were going to build a retaining wall, a driveway and a shop. This retaining wall was expected to comply with the local building codes. The following points flow from this conclusion:

a) The parties had reached a prior agreement whose terms are definite and ascertainable. They had agreed that the driveway would have a retaining wall. While the precise length of the wall may not have been agreed to, such precision was not necessary. It was sufficient that the agreement to build a retaining wall to code was ascertainable, definite and continuing. Hanley, at para. 46. b) That agreement was still effective when the APS was signed. The price went up by $70,000.00, and the reason for the price increase was the agreement to build a retaining wall, driveway and shop. c) The APS, at least on the Defendants’ submissions, failed to accurately record that agreement. For reasons discussed below, I am of the view that the agreement is ambiguous. However, if I am wrong in that conclusion, then the APS only specifies a driveway and it fails to accurately record the parties agreement. d) Finally, rectifying the APS to require a retaining wall to be built to the municipal standard would carry out the parties’ agreement.

[69] As a result, the first four elements of the test for rectification are met.

The Mistake and Fraud-like Elements

[70] In addressing the final two elements of the test for a unilateral mistake, a review of a number of facts is required. I start with the size of the shop. Mr. Melo asked for the shop to be built. Mr. Hiebert agreed to build a shop, as long as it was no larger than 25 feet by 32 feet. Mr. Melo’s uncontradicted evidence is that this size would not have required a minor variance from the municipality. If a minor variance had to be obtained, it would have slowed the transaction down. For reasons that I shall now explain, Mr. Hiebert did not want to obtain the minor variance as he knew that it would require the construction of a retaining wall.

[71] First, Mr. Melo had been asking Mr. Hiebert about the retaining wall, both in person and by text message. Mr. Hiebert avoided answering these questions until after the transaction had closed. Indeed, in cross-examination, Mr. Hiebert acknowledged that he does not recall telling Mr. Melo as to whether or not a retaining wall was required before the transaction closed. In my view, Mr. Hiebert was avoiding Mr. Melo’s questions because he knew that a retaining wall was required and he didn’t want to construct one.

[72] Second, Mr. Hiebert testified that he had been told by Barney the excavator that a retaining wall was not required. However, in his text messages to Mr. Melo (after the transaction closed), Mr. Hiebert stated:

They went out Tuesday for final lot grade and it came back approved. I was thinking we might need a retaining wall but we don’t according to lot grade site plan that Kim husteds If needed retaining wall would be in. Excavation needs to follow site plan in order to get final done. It’s unfortunate that the neighbors is too low. Site plan shows your driveway is already too high from my understanding. I can request another copy of site plan from Kim husted for you is [sic] you like.

[73] These messages are inconsistent with Mr. Hiebert's testimony, as he gave me a different reason for not building the retaining wall than the one he gave to Mr. Melo at the time. They are also inconsistent with Kim Husted’s testimony. Mr. Husted testified that he prepared a site plan in 2018. This 2018 plan did not include either the driveway or the shop at the back of the house. When Mr. Husted had his staff measure the grading in early May of 2019, they confirmed that the levels matched the 2018 plan. They did not consider the addition of the driveway or the shop.

[74] However, the 2018 grading plan did not account for the driveway to the shop or the shop itself. At the conclusion of Mr. Husted’s cross-examination, I asked counsel whether it would be appropriate to ask Mr. Husted whether the grading plan would have been different if they had shown a shop and a driveway. Counsel for the Defendants objected to this question, so I did not pose it to Mr. Husted.

[75] However, Mr. Melo had Mr. Husted prepare a grading plan in July of 2019. It appears to me to be different than the 2018 plan. It is also not difficult to infer that the presence of an additional driveway and building would have changed the grading plan. Indeed, the evidence from Mr. Girard makes it clear that a retaining wall was required and that it would have been reflected on the grading plan.

[76] The fact that a retaining wall was required was also made clear in the conversation between Mr. Hiebert, Mr. Melo and Mr. Koppert. Indeed, in Mr. Koppert’s evidence, he stated that the need for a retaining wall was obvious. Mr. Koppert’s evidence is objective evidence of the parties’ intent when they made their original deal. Mr. Hiebert knew that a retaining wall was required and attempted to deflect the issue until after the APS had been completed.

[77] I find further support for this conclusion by the evasive way in which Mr. Hiebert responded to questions in cross-examination about whether updated plans were submitted to the municipality for approval. When asked whether it was necessary to submit plans for the shop, Mr. Hiebert stated that it wasn’t necessary as he had the building permit. Then, when Mr. Hiebert was asked whether he had obtained approval for the driveway, Mr. Hiebert said it was not necessary as it was obvious that he was building the driveway to the shop.

[78] This brings me to the issue of the occupation permit. Again, this was an area where Mr. Hiebert was evasive in his responses. When asked whether he had permission to occupy the premises when the APS closed on April 30th, 2019, Mr. Hiebert said that Bill Knifton (the municipal building inspector) had been out at the property the day before and it was taking him time to get things done. It was only when specifically asked whether he had anything in writing prior to May 22nd, 2019 giving him permission to occupy the premises that Mr. Hiebert admitted that he did not.

[79] Mr. Hiebert also testified that the shop was not wired by a certified electrician. Instead, Mr. Hiebert had wired the shop himself. He is not qualified as an electrician. Mr. Hiebert’s approach to these issues demonstrates someone who was either minimizing the legal requirements for the work he was doing in respect of the shop and the driveway or totally ignoring them.

[80] Mr. Hiebert’s conduct also demonstrates both knowledge of what the parties had agreed to (a retaining wall) and fraud-like attempts to avoid constructing that wall. The two further requirements for rectification in a case of unilateral mistake are made out.

[81] That is not the end of the matter, however. The Court has discretion in deciding whether to grant rectification. In addition, if the Plaintiffs do not have clean hands, then rectification is not available to them. Hanley, at paras. 29, 89. Sylvan Lake, at para. 66.

[82] Counsel for the Defendants argues that the parties were attempting to avoid municipal approvals by calling the shop a shed, and by limiting its size. As a result, counsel argues that the Plaintiffs do not have clean hands. I disagree. The size of the shop was set by Mr. Hiebert, and it was designed so that the transaction was not slowed down. Mr. Melo accepted Mr. Hiebert's conditions. I cannot infer from this that Mr. Melo knew that the shop or the driveway would be built contrary to the municipal standards, particularly since they discussed the need for a retaining wall. All that can be inferred is that the municipality would not have to re-approve the site plans.

[83] Mr. Melo accepted Mr. Hiebert’s suggestion about the size of the shop. Mr. Hiebert made that suggestion in bad faith in order to avoid the municipal approvals process, so that he could pocket extra profits. He also promised to build a retaining wall as part of the bargain in which he received $70,000 in extra money for the property, and then engaged in misconduct to avoid his promise. There is nothing in the Plaintiffs’ conduct that would persuade me not to exercise my discretion to grant rectification.

[84] For the foregoing reasons, the Hieberts are liable for the costs associated with the construction of the retaining wall to municipal standards.

c) Is the Contract Ambiguous?

[85] I have already found that Mr. Hiebert’s behaviour was fraud-like within the meaning of the rectification case law. However, even on Mr. Hiebert’s evidence, the wording of the APS is ambiguous. Mr. Hiebert was asked whether he believed that some of the text messages were part of the APS. His response was that, at the time that the APS was completed, they were unsure as to whether a retaining wall was needed.

[86] Therefore, even on Mr. Hiebert’s evidence, the retaining wall would have been built if it was required and the APS might not have been clear as to whether the retaining wall was part of the driveway. Put another way, the phrase “gravel driveway installed to shed” has to mean a driveway that is compliant with the local building codes. Mr. Hiebert acknowledged as much.

[87] For the reasons set out at paragraphs 62 and following, I have concluded that the parties discussed the retaining wall and agreed that it would be constructed if it was necessary. As a result, the phrase “gravel driveway” should be read to include an acknowledgement that a retaining wall would be included if necessary. It is of no assistance to the Defendants that Barney the excavator said that a retaining wall was not necessary. The rest of the witnesses, including the expert engineer, were clear that a retaining wall was required. It should have been built.

[88] Therefore, even if rectification is not available to the Plaintiffs, I find that the contract contains an ambiguity and that the ambiguity should be interpreted in a commercially reasonable manner. The only reasonable way to interpret the phrase construction of a gravel driveway is to interpret it as being a legal (i.e. conforming) driveway. It requires a retaining wall.

d) Conclusion

[89] The retaining wall was required by the APS, either through rectification or by operation of the ambiguity in the APS. As a result, the costs of construction are to be borne by the Hieberts.

[90] The evidence I had before me indicated that the Plaintiffs had obtained a quote for this work of $33,700.00 plus HST for a total of $38,081.00. Mr. Melo testified that part, but not all, of this work has been done and that the part that has been completed cost $18,000.00. He also testified that this quotation was a reasonable amount to pay for the work. Jeffrey Mallett, a contractor, provided a quotation for a retaining wall of 40 meters in length. The work set out in Mr. Mallet’s Affidavit, which was uncontradicted, was based on the site and grading plans.

[91] Mr. Girard testified that the retaining wall would have to be at least 12 meters long. He testified that it could be longer but would not be shorter. Mr. Girard also testified that there could be a number of options that were used to solve the problem, but that some form of a retaining structure was going to be required.

[92] There is no contradictory evidence before me. As a result, I accept that a retaining wall of 40 meters is required for the property. I also accept that the costs associated with that retaining wall are the Hieberts’ responsibility.

Issue #2- The Other Problems With the Property

a) The Issues

[93] In addition to the retaining wall, there were other deficiencies that were claimed by the Plaintiffs, as follows:

a) There was water entering the basement, that damaged both the drywall and the carpeting. b) The water system could not hold pressure or produce sufficient water and had to be re-installed. c) There were problems with the stones on the main floor fireplace. d) The shower doors in one of the washrooms were not properly installed, and some of the tiles cracked as a result.

[94] The two significant issues were the water leakage and the pressure in the well. The water leakage was discovered on the first weekend that the Defendants lived in the property. Further investigations revealed that the leakage resulted from a waterproofing issue around the front stairs. While the Defendants claimed not to have seen this issue while they lived in the property, I am of the view that the description of the leaking and of the remedial steps taken to address the leaking make it likely that this defect existed at the time the property was sold. It is also quite possible that the Hieberts were aware of the defect when they sold the property.

[95] This brings me to the pressure in the well. This was an issue that became obvious to the Melos by May 2nd, 2019. At that point, they noticed a substantial drop in water pressure in the house and could not do both laundry and dishes at the same time. By mid-June, they had no water in the house, and had to run hoses to the neighbor’s house to obtain water. A third party was retained to re-drill the well and repair the water system.

[96] The other issues are less significant defects. However, I accept the evidence of the Plaintiffs that these defects were noticed relatively soon after they moved into the property. In particular, Mr. Melo asked Mr. Hiebert about bricks for the fireplace within the first week or so of moving in. It is, therefore, likely that these defects resulted from errors or omissions in the construction of the house.

[97] Given these observations, I have no hesitation in concluding that all of these defects pre-dated the transfer of the property from the Defendants to the Plaintiffs. I also note that detailed quotes (or, in the case of the water pressure issues, invoices) to fix each of the issues were filed by the Plaintiffs as part of the Joint Book of Documents. Those quotes were unchallenged, and I accept them as being a correct estimate of damages. The question is whether the Defendants are liable to reimburse the Plaintiffs for the costs of fixing these deficiencies.

b) The Potential Bases for Recovery

[98] In his closing submissions, counsel for the Plaintiff argued that, since the damages had been proven, his clients were entitled to recover for them. Counsel for the Defendant argued that the whole agreement clause set out at paragraph 19 precludes any recovery. Counsel for the Defendant also points out that the Plaintiff had an opportunity pursuant to the APS to conduct a building inspection prior to purchasing the property and chose not to. There was also some discussion of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (“ONHWPA”), and whether the home was covered under that legislation.

[99] In preparing my reasons, I determined that I required submissions from both parties on the following five questions:

a) Was the Eden Line property occupied within the meaning of the ONHWPA as of the date that it was sold to the Melos? b) If the answer to question (a) is no, are the Hieberts vendors within the meaning of the ONHWPA? c) If the answer to question (b) is yes, are the Hieberts bound to the warranty in section 13(1) of the ONHWPA? d) If the Hieberts are bound to the warranty, can the Melos enforce the warranty through a court proceeding, or are they required to enforce the warranty through Tarion? e) Are there any other legal routes (beyond ONHWPA) by which the Melos would be entitled to damages for the defects, other than the retaining wall?

[100] I have received and considered further written submissions from both parties on these issues.

c) Does the ONHWPA Permit the Plaintiffs to Recover in This Action?

[101] Answering this question requires a consideration of the first four questions that I have asked. These issues arise because the APS closed and the Melos moved into the property on April 30th, 2019. However, the Municipality of Bayham did not provide either the final inspection report or the occupancy permit until May 22nd, 2019. As a result, there is a live legal issue as to whether the Hieberts ever occupied the property from a legal, rather than a factual perspective. I accept that the Hieberts actually resided in the property from sometime in February until the end of April, 2019.

[102] I also note that, as part of the materials that Plaintiffs’ counsel filed in response to my request for submissions, there is an e-mail from Tarion that states:

Good Morning, In follow-up to our phone conversation on Friday, February 28, 2020 regarding your home located at 54130 Eden Line in Aylmer, it has been determined that your home is not eligible for statutory warranty coverage under the Ontario New Home Warranties Plan Act based upon the following: Previously Occupied/Rental The investigation into your home revealed that it was previously occupied. The statutory warranties apply to new homes and accordingly, do not apply to homes that have been previously occupied by the vendor/builder or rented out by the vendor/builder and occupied by other persons before being sold to a purchaser. Please feel free to contact me should you have further questions or concerns regarding the determination with respect to your home. For more information regarding types of homes not covered by Tarion please visit our website.

[103] With these additional facts in mind, I need to consider four points that flow from the questions I have posed:

a) Does Tarion have exclusive responsibility for enforcing the warranty under the ONHWPA? b) Have the Melos accepted Tarion’s jurisdiction by filing materials with Tarion and receiving the decision described in paragraph 102? c) If the Melos have not accepted Tarion’s jurisdiction, is the property actually occupied within the meaning of the ONHWPA? d) If the property was not occupied within the meaning of the ONHWPA, does the warranty apply to any of the defects identified by the Melos?

[104] I will deal with each of these sub-questions in turn. In doing so, I note that there have been considerable changes to the ONHWPA over the years. Before doing that, I will set out the relevant portions of the ONHWPA. The statutory provisions I have reproduced and am relying upon are from the version that was in place at the time that the APS closed.

The Relevant Statutory Provisions

[105] Under the ONHWPA, there are definitions of a builder, a vendor and an owner. For the purposes of this case, the definition of a vendor is the most important. It states:

“vendor” means, (a) except in relation to a residential condominium conversion project, a person who, on the person’s own behalf, sells a home not previously occupied to an owner and includes a builder, as defined in clause (a) of the definition of “builder”, who acts as such under a contract with the owner, or (b) in relation to a residential condominium conversion project, a person who, on the person’s own behalf, sells a home in the project to an owner and includes a builder, as defined in clause (b) of the definition of “builder”, who acts as such under a contract with the owner; (“vendeur”)

[106] In this case, the Hieberts might be vendors or builders if they sold the Eden Line property to the Melos if it was not previously occupied. They would then be bound to the warranty.

[107] The warranty itself is set out in section 13(1), which reads as follows:

13 (1) Every vendor of a home warrants to the owner, (a) that the home, (i) is constructed in a workmanlike manner and is free from defects in material, (ii) is fit for habitation, and (iii) is constructed in accordance with the Ontario Building Code; (b) that the home is free of major structural defects as defined by the regulations; and (c) such other warranties as are prescribed by the regulations.

[108] Section 13(2) sets out some exclusions from the warranty. On the evidence I heard, these exclusions are not relevant. Section 14 of the ONHWPA allows for compensation for breaches of the warranty. Decisions on compensation pursuant to the warranty can be made by Tarion under section 16 of the ONHWPA. It is worth setting that section out in some detail:

Notice of decision under s. 14 16 (1) Where the Corporation makes a decision under section 14, it shall serve notice of the decision, together with written reasons therefor, on the person or owner affected. R.S.O. 1990, c. O.31, s. 16 (1). Notice requiring hearing (2) A notice under subsection (1) shall state that the person or owner served is entitled to a hearing by the Tribunal if the person or owner mails or delivers, within fifteen days after service of the notice under subsection (1), notice in writing requiring a hearing to the Corporation and the Tribunal. R.S.O. 1990, c. O.31, s. 16 (2). Powers of Tribunal (3) Where a person or owner gives notice in accordance with subsection (2), the Tribunal shall appoint a time for and hold the hearing and may by order direct the Corporation to take such action as the Tribunal considers the Corporation ought to take in accordance with this Act and the regulations, and for such purposes the Tribunal may substitute its opinion for that of the Corporation. R.S.O. 1990, c. O.31, s. 16 (3). Parties (4) The Corporation, the person or owner who has required the hearing and such other persons as the Tribunal may specify are parties to proceedings before the Tribunal under this section. R.S.O. 1990, c. O.31, s. 16 (4).

[109] There are other relevant provisions of both the ONHWPA and the regulations, and I will review those as I proceed through my analysis.

Responsibility for Enforcing The Warranty

[110] Section 16 gives Tarion the right to make decisions about the warranty, including decisions as to whether or not a homeowner is covered by the warranty. The Supreme Court’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653 requires the Courts to accept legislative choices in the creation of administrative bodies and the assignment of powers to those bodies (see paragraph 24, in particular).

[111] In this case, the legislature has endowed Tarion with the power to consider and decide issues in respect of the warranty. However, a close review of the statute and the jurisprudence persuades me that this power has not been given to Tarion alone and that there is room for the Courts to enforce the warranty.

[112] I start with the Court of Appeal’s decision in Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc., 2012 ONCA 850, 113 O.R. (3d) 673. In that decision, the Plaintiff condominium corporation had originally received a decision from Tarion and had appealed that decision to the Licensing Appeals Tribunal (“LAT”). The condominium corporation withdrew the appeal from the LAT and proceeded with a Court action. Tarion supported the condominium corporation’s assertion that it could seek relief under the warranty either through Tarion and the appeal mechanism to the LAT or through the Courts.

[113] The Court of Appeal accepted this position and noted, at paragraph 69:

[69] This Act, however, does not contain any language to show that the legislature intended to preclude a civil action against the vendor on the statutory warranties and require homeowners to go to the Licence Appeal Tribunal. Although the Act does provide for an appeal to the tribunal, the language of s. 16(3) is permissive. It says the homeowner is "entitled to a hearing by the Tribunal", not that he or she "shall" or "must" proceed before the tribunal to the exclusion of any other forum.

[114] The Court of Appeal went on to point out that there was nothing in the legislation that prevented a party from suing Tarion either (paragraphs 80 to 83).

[115] Flowing from this analysis is the fact that Tarion itself supports the rights of owners to bring claims in respect of the warranties in the Courts. Tarion’s own policies speak to this as a potential remedy.

[116] The reasoning from Metropolitan was subsequently followed in Baradaran v. Tarion Warranty Corporation, 2014 ONCA 597. In that case, the Court noted (at para 34) that “proceedings under the [ONHWPA] do not necessarily preclude a civil action based on the same facts.”

[117] Counsel for the Hieberts directs my attention to the decision in Tarion Warranty v. 1518162 Ontario Inc., 2015 ONSC 6532. In that decision (at para. 63), the Court notes that there is a tribunal empowered to hear appeals from Tarion decisions. I agree with that observation. However, that does not address the larger question of whether that Tribunal’s jurisdiction is exclusive.

[118] As a result, I conclude that the decision in Metropolitan is binding on me, even after Vavilov, and that I have the jurisdiction to consider whether a party is a builder or a vendor, and whether they have violated the warranty.

The Tarion Decision

[119] Counsel for the Hieberts argues that the decision set out at paragraph 117 is binding on the Melos and that it acts as a bar to any warranty claims. I reject that assertion for two reasons. First, the decision in Metropolitan allows a party who has brought a claim in the Tarion system to withdraw that claim and proceed in the Courts.

[120] Second, section 16 of the ONHWPA sets out the requirements for a decision. Among other things, any decision that Tarion makes must set out the right to appeal that decision to the LAT. The appeal rights were not set out in the decision produced at paragraph 102. Therefore, it is difficult to see how it could be a valid decision within the meaning of section 16 of the ONHWPA as it did not comply with the mandatory notice requirements under section 16. As a result, it cannot act as a bar to the Plaintiff’s claim.

[121] For these reasons, I conclude that the Melos can have recourse to the Courts to consider whether the warranty applies.

Was the Eden Line Property Occupied?

[122] Counsel for the Hieberts argues that, since the Hieberts lived in the Eden Line property, it was occupied and the warranty cannot apply to it. I accept that, if the Hieberts “occupied” the property within the meaning of the ONHWPA, then they cannot be builders or vendors and the warranty does not apply to them.

[123] However, the mere fact that the Hieberts lived in the property does not mean that they “occupied” it. Occupied is not a defined term under the ONHWPA. It must, therefore, be given its plain and ordinary meaning. However, it must be read in harmony with the other statutes, particularly closely related statutes such as the Building Code.

[124] It would be incongruous with the scheme and objects of the ONHWPA to adopt an interpretation of the Act that allowed a party to claim a property was occupied when they had no legal right to occupy it under the Building Code. This would permit builders or vendors to live in a half-constructed home and then subsequently sell it before occupancy was permitted and avoid their responsibilities under the ONHWPA.

[125] Indeed, there have been cases where people have been prosecuted under the Provincial Offences Act, R.S.O. 1990, c. P.33, and the Courts have found that the premises will only be occupied after a building permit is issued. See Tarion Warranty Corporation v. Dhakal [2011] O.J. No. 3342 (Prov. Ct.).

[126] Counsel for the Defendants asserts that Dhakal is distinguishable from this case. I disagree for two reasons:

a) The fact that Tarion has stated that the home was occupied is not a final answer to the matter. As discussed elsewhere in these reasons, the Court has jurisdiction to make its’ own finding. b) The fact that, in this case, the occupancy permit was obtained promptly after it was discovered that the parties did not have it is also of no assistance to the Defendants. The fact that the building permit was obtained promptly does not change the fact that it hadn’t been issued when the property was sold.

[127] When I read the term occupied in harmony with the Building Code, I conclude that the building was not “occupied” within the meaning of the ONHWPA.

[128] This brings me to the question of whether the Hieberts were vendors within the meaning of the ONHWPA. Counsel for the Respondent argues that they were not vendors on the basis that they had originally intended to build the property so that they could live in it. In support of this argument, counsel directs my attention to the Court of Appeal’s decision in Tarion Warranty Corporation v. Boros, 2011 ONCA 374, 105 O.R. (3d) 401.

[129] Boros was a criminal prosecution brought by Tarion against Mr. Boros. He testified that he originally intended to occupy the home himself. However, at some point before the home was completed, he decided to sell it because he and his wife (who was the owner of the property) were unable to sell their previous matrimonial home.

[130] The Court of Appeal found that Mr. Boros was not a builder within the meaning of the ONHWPA. The Court stated (at paras. 44 and 45):

[44] In my view, the wording of the legislation is geared toward those who begin the construction of a completed home with the intention of selling it to others. It is not geared toward those who, like the respondent, begin with the intention of building a home for their own use and occupation and then when circumstances change decide to sell to others. The definition of "builder" is precise. The respondent meets the first part of the definition in that he undertook all the work and supply of all the materials necessary to construct a completed home; however, he did not, at least at the time of his "undertaking", do so for the purpose of sale.

[45] Certainly, the respondent would meet a layman's understanding of the term "builder" or even a dictionary definition of the term. But here, the legislature has given a specific legislated meaning to the term and the respondent on this record does not meet that definition. In my view, if the legislature intended the ONHWP Act to apply to persons like the respondent, it had to say so in clear terms. It does not.

[131] In Boros, the Court of Appeal also notes that there are cases where this Court has held that a vendor can include someone who changes their mind and decides to sell a home. Indeed, the lower court decision in Boros clearly notes that vendor is defined as a person who “sells” the home. It is a definition that applies at a particular instant and, therefore, it does not matter whether the parties’ intentions have changed. All that matters is that, at the moment of the sale, the party selling the property becomes a vendor within the meaning of the ONHWPA if the building has not previously been occupied.

[132] In addition, the Court in Boros notes Carreiro v. Moreira (1998), 19 R.P.R. (3d) 80 (Ont. Gen. Div.). In that case, the Court also considered (in obiter) the definition of builder The scope of the term builder as set out in Moreira was narrowed by the Court of Appeal in the Boros decision. However, Moreira also sets out a definition of vendor. It is clear from the definition that vendor is a term that is different than builder, and that it is a term that should be read broadly. It is a person who sells a home not previously occupied to an owner.

[133] In other words, vendor includes anyone who sells a new build home. Unlike the term builder in the Boros case, the term vendor is clear. It includes anyone who sells a home that has not previously been occupied. I also note that the Court in Boros accepted that the ONHWPA is remedial legislation and must be given a “fair and liberal” interpretation (para. 21).

[134] Given the breadth of the definition of vendor in the ONHWPA, it is difficult to see how the definition cannot include the Hieberts on the facts of this case. They were selling a home that had not previously been occupied at law. As a result, they are covered by the definition of vendor. It follows that they are bound to the warranty.

d) Does the Warranty Permit Recovery for Any of the Damages?

[135] Yes.

[136] I start by noting that, in my view, the definition of major structural defect as set out in the regulations does not capture any of the complaints about the property.

[137] However, section 14(1) of O. Reg. 892/90 (General) states:

14. (1) Every vendor of a new home warrants to the owner that there will be no water penetration through the basement or foundation of the home. O. Reg. 9/09, s. 7. (2) The warranty described in subsection (1) applies only in respect of claims made during a two-year warranty period ending on the second anniversary of the date of possession. O. Reg. 9/09, s. 7.

[138] As a result, I am of the view that the damage caused by the water entering the basement, because the house was not properly waterproofed, is covered by the warranty and is the responsibility of the Hieberts.

[139] The damages for that loss are as set out in the Affidavits of Pasquale Bruno, Paul Spoljaric and Jeffrey Mallet. They are as follows:

a) For removing the stone from the front of the house, finding the water leak and reinstalling the stone, $4,700.00 plus HST. b) To replace the carpet and underpad damaged by the leak, $2,900.00 plus HST. c) To remove and replace the drywall, $9,802.75 plus HST.

[140] These quotations are all uncontradicted. As a result, I accept them as the appropriate calculation of the costs to repair the damage that flows from the failure to properly waterproof the foundation of the house. The Hieberts are responsible for these costs, inclusive of HST. The total amount is $19,665.11.

[141] The damage claims for everything other than the leak in the basement are not covered by the warranty.

e) Do the Plaintiffs Have Other Routes to Recover These Damages?

[142] No.

[143] In his supplementary submissions, Plaintiff’s counsel correctly acknowledges that the issues in respect of the retaining wall are addressed through either rectification or the interpretation of the APS. He also correctly concedes that there is no way, other than through the Tarion warranty, for the Plaintiffs to enforce any other claims as against the Defendants.

[144] Counsel for the Defendants has previously argued that paragraph 26 of the APS acts as a complete bar to any claims that are not specifically covered by the APS. Other than my conclusions on the retaining wall and the leaking basement, I agree with counsel on this point. The remainder of the claims in respect of defects in the construction of the property brought by the Melos are dismissed.

Issue #3- Punitive Damages

[145] The Plaintiffs were originally seeking $10,000.00 in punitive damages. The basis for this request was the conduct of Mr. Hiebert in both his approach to the retaining wall and to the other problems that the Defendants found when they moved into the property.

[146] The claim for punitive damages was abandoned during the course of final argument. Counsel acknowledged that punitive damages are awarded against a defendant in exceptional cases for conduct that is malicious, oppressive and high-handed. It is the sort of conduct that represents a marked departure from ordinary standards of decent behaviour. Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 36; Hill v. Church of Scientology of Toronto, 1995 SCC 59, [1995] 2 S.C.R. 1130, at para. 196.

[147] In this case, while Mr. Hiebert’s conduct is concerning, it does not rise to the level that would attract punitive damages. This case can be contrasted with the decision in Sylvan Lake. In that decision, the Court found that the Defendant’s egregious conduct of “contemptuous disregard for [the Plaintiff’s] rights” combined with the use of a written document that the Defendant would have known was misleading was not conduct that would attract an award of punitive damages.

[148] Similarly, the conduct of the Defendants in this case was not sufficient to attract an award of punitive damages. Plaintiff’s counsel conceded as much during argument, and I so find.

Conclusion and Costs

[149] For the foregoing reasons, I conclude that the Plaintiffs are entitled to damages for the following:

a) $38,081 for the costs, inclusive of HST, to construct the retaining wall along the driveway. b) $19,665.11 for the costs, inclusive of HST, to repair the damage caused by the leak in the foundation.

[150] This brings me to the subject of costs. I directed the parties to file their bills of costs at the conclusion of the hearing. I have received those bills, and will review them as part of my consideration of the costs issues. The Plaintiffs are to serve and file their costs submissions within seven (7) calendar days of today’s date. Those submissions are to be no longer than three (3) double-spaced pages, exclusive of bills of costs, offers to settle and case-law.

[151] The Defendants shall have seven (7) calendar days to serve and file their responding costs submissions. Those submissions are also to be no longer than three (3) double-spaced pages, exclusive of bills of costs, offers to settle and case-law.

[152] The parties are also directed to provide an electronic copy of their costs submissions to my judicial assistant, Ryan Chan, at ryan.chan2@ontario.ca. Both methods of filing are required. There will be no extensions on the deadline for costs submissions, even on consent, without my leave. If I do not receive costs submissions in accordance with the deadlines set out above, then there shall be no costs for this matter.

[153] Finally, I should mention again that counsels’ efforts to organize the evidence and streamline the presentation of the case after we held the case conference were appreciated.

LEMAY J Released: January 19, 2024