DATE: 20020912 DOCKET: C36844

COURT OF APPEAL FOR ONTARIO

RE: ONTARIO NEW HOME WARRANTY PROGRAM (Plaintiff/ Respondent) – and – YOUNG & WRIGHT ARCHITECTS (Defendant/Appellant) – and – ADJELEIAN ALLEN RUBELLI LIMITED, PAUL D. FERRIS & ASSOCIATES LTD., PAUL D. FERRIS & ASSOCIATES LANDSCAPE ARCHITECTS, THE INTERSIGN ENGINEERING CORPORATION, INTERSIGN MECHANIC/ELECTRICAL ENGINEERS (Defendants/ Respondents) – and – JACK GRANT, 512729 ONTARIO LTD., FICAN PROPERTIES INC., RED CEDAR INVESTMENTS LTD., and RAMIRA BUILDERS INC. (Defendants)

BEFORE: ABELLA, MOLDAVER and SHARPE JJ.A.

COUNSEL: P. John Brunner for Young & Wright Architects

Vern Rogers for Paul D. Ferris & Associates Ltd. and Paul D. Ferris & Associates Landscape Architects

Lawrence Pattilo and John Terry for Ontario New Home Warranty Program

HEARD: September 10-11, 2002

RELEASED ORALLY: September 11, 2002

On appeal from the judgment of Justice Tamarin Dunnet dated July 23, 2001.

E N D O R S E M E N T

[1] [1] The parties presented four questions to the motions court judge by way of a special case pursuant to Rule 22. In view of the conclusion we have reached with respect to questions 1 and 2, it is not necessary for us to address questions 3 and 4 which were advanced as alternative arguments.

[2] [2] We agree with the motions court judge that s. 13 of Reg. 892 is intra vires. In our view, the words of s. 23(1)(m) of the Act authorizing the respondent Corporation to make by laws providing for "subrogating the Corporation or a named insurer to any right of recovery of a person in respect of a claim paid out of the insurance under the Plan" are sufficiently broad to authorize providing for subrogation where a payment has been "made out of the guarantee fund under the Act" as in s. 13(1). We do not accept the appellant's contention that s. 23(1)(m) is restricted to payments by an "insurer" pursuant to s. 7 of the Regulation. That would produce the very odd result that the Corporation would have no right of subrogation with respect to payments it makes but would be given a right of subrogation with respect to payments made by someone else.

[3] [3] Although we do not necessarily agree with all of the motions court judge's reasons for her answer to question 2, we arrive at the same conclusion for the following reasons. For the purposes of this appeal, to bring itself within s. 13(1) of the Regulation, the Corporation must show that (1) a payment has been made (2) to the person to whose rights the Corporation claims to be subrogated (3) in respect of a claim made out of the guarantee fund.

[4] [4] Section 13(1) must be read in the light of s. 14 of the Act of the Act governing the payment of compensation. In view of s. 14(3) of the Act, we are satisfied that the expenses incurred by the Corporation to rectify the construction deficiencies in the condominium project qualify as (1) payments (2) to a person, triggering a right of subrogation. Section 14(3) authorizes the Corporation "to arrange for the performance of any work in lieu of or in mitigation of damages claimed under subsection (1)". As the Act specifically authorizes the Corporation to make such expenses in lieu of paying a claimant damages, those expenses must also qualify in law as payments for the purposes of subrogation under s. 13(1) of the Regulation.

[5] [5] We are also satisfied that on the facts set out in paragraphs 22- 30 of the Special Case, the expenses were incurred in respect of "a claim" within the meaning of s. 13(1). The purchasers asked the Corporation to rectify the builder-vendor's default. In view of its statutory obligations, in particular "because the deficiencies in the construction …would worsen over time and their repair would become more expensive", the Corporation incurred expenses to rectify defects in the construction. The Corporation does not have to show that it acted on a formal or written claim to assert a right of subrogation under s. 13(1). The form and procedure prescribed for claims govern the dealings between the Corporation and claimants, not any subrogated rights the Corporation may have against third parties.

[6] [6] Finally, it is our view that the Corporation's right to assert a subrogated claim is not defeated by the fact that the payments triggering the claim were made before the condominium corporation came into existence. Section 14(1)(a) provides for claims by purchasers who are not owners. In view of the builder-vendor's failure to complete the project, the purchasers in effect asserted the claim that would have been made by their alter ego, the condominium corporation, had the project been completed. The Corporation was authorized to take immediate remedial steps to mitigate the loss. Given the remedial purpose of the Act and Regulation, we find that the purchasers' request qualifies as a claim for purposes of the subrogation rights in s. 13(1).

[7] [7] Accordingly, the appeal is dismissed.

“R.S. Abella J.A.”

“M.J. Moldaver J.A.”

“Robert J. Sharpe J.A.”