Ontario New Home Warranty Program v. Gourlay; Town-Wood Homes Limited, Added Party

[Indexed as: Ontario New Home Warranty Program v. Gourlay]

50 O.R. (3d) 626

[2000] O.J. No. 3650

Court File No. 654/98

Ontario Superior Court of Justice Divisional Court

O'Driscoll, Whalen and J.W. Quinn JJ.

October 3, 2000

Sale of land -- New Home Warranty Program -- Coverage under warranty program -- After closing of transaction, purchaser claiming that she should have received legal title rather than easement over side yard -- Purchaser making claim under Ontario New Home Warranty Program for title deficiency -- Program's coverage not including compensation for title deficiencies in land conveyed to purchaser -- Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31, s. 14.

G signed an agreement to purchase a fourplex from T Ltd. A year after the transaction closed, she asserted that she should have received legal title rather than an easement over the side yard that provided access to her home, and she claimed compensation from the Ontario New Home Warranty Program ("the Program") from the alleged failure of T Ltd. to convey title to the side yard to her. The Program denied her claim. She appealed to the Commercial Registration Appeal Tribunal ("CRAT"), and CRAT ordered the Program to obtain title to the side yard or to pay her $4,889.12. The Program appealed.

Held, the appeal should be allowed.

In ordering compensation, CRAT purported to apply s. 14(1) of the Ontario New Home Warranties Plan Act, which applies where a person who has entered into a contract with a vendor for the provision of a home has a cause of action in damages against the vendor for financial loss resulting from the bankruptcy of the vendor or the vendor's failure to perform the contract. This section protects those who suffer financial loss when the vendor or builder never completes the contract. CRAT erred in applying s. 14(1)(a) to a situation where the transfer had been completed. Further, s. 14(1)(a) is not intended to compensate any and every breach of contract but is intended to cover "financial loss" when the vendor fails to complete the contract. Section 14(1)(a) was not available to compensate for alleged deficiencies in the title conveyed. Accordingly, the appeal should be allowed.

APPEAL pursuant to s. 11 of the Ministry of Consumer and Commercial Relations Act, R.S.O. 1990, c. M.21.

Cases referred to Armstrong (Re), [1995] O.C.R.A.T.D. No. 32; DiCenzo Construction Co. v. Glassco (1978), 1978 1472 (ON CA), 90 D.L.R. (3d) 127, 21 O.R. (2d) 186 (C.A.); Fraser-Reid v. Droumtsekas (1979), 1979 55 (SCC), 103 D.L.R. (3d) 385, 29 N.R. 424, 9 R.P.R. 121, [1980] 1 S.C.R. 720; Greenberg (Re), [1997] O.C.R.A.T.D. No. 148, affd (November 22, 1998) (Div. Ct.); Kaminski (Re), [1994] O.C.R.A.T.D. No. 126; Legacy (Re), [1991] O.C.R.A.T.D. (1991) C.R.A.T. 790; Lu (Re), [1994] O.C.R.A.T.D. No. 86; Richview Construction Co. v. Raspa (1975), 1975 720 (ON CA), 11 O.R. (2d) 377, 66 D.L.R. (3d) 193 (C.A); Thompson v. Trepil Realty Ltd., 1962 208 (ON SC), [1962] O.R. 956, 34 D.L.R. (2d) 697 (H.C.J.) Statutes referred to Ministry of Consumer and Commercial Relations Act, R.S.O. 1990, c. M.21 (rep. 1999, c. 12, Sch. G, s. 27, in force April 1, 2000), s. 11(1), (5) Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31, ss. 13(1)(a), 14 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 13.03

Timothy J. Hill, for the Ontario New Home Warranty Program. Donna Gourlay and Glen Gourlay, in person. M.A. Cohen, for Town-Wood Homes Limited.

BY THE COURT: --

I. Nature of the Proceedings

[1] The Ontario New Home Warranty Program (the "Program") appeals to the Divisional Court under the provisions of s. 11(1) of the Ministry of Consumer and Commercial Relations Act, R.S.O. 1990, c. M.21:

11(1) Any party to proceedings before the Tribunal may appeal from its decision or order to the Divisional Court in accordance with the rules of court.

(5) An appeal under this section may be made on questions of law or fact or both and the court may exercise all the powers of the Tribunal, and for such purpose the court may substitute its opinion for that of the Registrar or of the Tribunal, or the court may refer the matter back to the Tribunal for rehearing, in whole or in part, in accordance with such directions as the court considers proper.

[2] The appeal is from a decision of the Commercial Registration Appeal Tribunal ("CRAT"), dated September 17, 1998, ordering the Program to obtain title to certain property on behalf of Donna Gourlay or, in the alternative, to pay to Ms. Gourlay $4,889.12, being CRAT's estimate of the value of the property alleged to be in dispute.

[3] At the opening of the appeal, an order was made under rule 13.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 adding Town-Wood Homes Limited as a party to this appeal.

[3a] The appeal succeeds.

II. Background and Chronology

[4] On June 3, 1996, Ms. Gourlay signed a purchase and sale agreement ("agreement") with Town-Wood Homes Limited ("Town- Wood") to purchase Lot 108-40, Unit 1, Plan 43 M-1175, Brampton, known municipally as 49 Yellow Brick Road. The agreement states:

The undersigned Donna G. Gourlay (the "Purchaser") hereby agrees to and with Town-Wood Homes Limited (the "Vendor"), to purchase all and singular the premises on the East side of Yellow Brick Road in the City/Town of Brampton (the "Municipality"), in the Regional Municipality of Peel (the "Region") and being (part of) Lot No. 108 according to Registered Plan No. 43M-1175 (the "Plan of Subdivision") having a frontage of about per schedule "L" metres, more or less, by a depth of XXXXXXX metres more or less, (the "Real Property") for the sum of One Hundred and Twenty-Four Thousand Nine Hundred DOLLARS ($124,900.00)

[5] Unit 40 and Unit 37 share a side yard which gives each of those units access to its main entrance. The side yard for Unit 40 and Unit 37 is fully owned by the owner of Unit 37. Ms. Gourlay has an easement over the side yard. Schedule "L" depicts Lots 106, 107 and 108. Schedule "L" shows the division of the lots into separate parts and gives approximate dimensions. However, Schedule "L" does not indicate which property is owned by each of the individual units on the given lot. Thus, Schedule "L" is helpful as an overall site plan of Lot 108 but did not describe the property Ms. Gourlay was purchasing. Before CRAT, Ms. Gourlay so admitted.

[6] To identify what property Ms. Gourlay was purchasing according to the agreement, it was necessary to examine the description set out in the transfer deed and compare that description with the registered plan.

[7] The plan of subdivision was deposited with the Land Registrar for Land Titles Division of Peel on September 9, 1996 and became Plan 43R21797. The north half of Lot 108 is shown to have four parts:

Part 35: a 40-centimetre strip bordering the north wall of Unit 40;

Part 36: a 1.2-metre irregularly-shaped strip of the side yard, bordering Part 35 and 37;

Part 37: the property occupied by Unit 40, the patio and driveway;

Part 38: the property occupied by Unit 37, the patio, the driveway and all the side yard, save for Parts 35 and 36.

Parts 35 and 36 represent the side yard.

[8] In a letter, dated September 12, 1996, the solicitor for the vendor, Town-Wood, sent to Ms. Gourlay's solicitor a reproduction of that part of Registered Plan of survey 43R21797 showing Lot 108. Town-Wood's solicitor in the same letter sent to Ms. Gourlay's solicitor a draft transfer deed. It showed that Part 37 was being conveyed to Ms. Gourlay along with an easement over Part 35 and Part 36 (side yard) and that no title in Parts 35 and 36 was being conveyed to Ms. Gourlay.

[9] Ms. Gourlay's solicitor made no objections to title. The transaction closed on September 27, 1996.

[10] One year later, by letters of September 12, 1997 and September 24, 1997, Ms. Gourlay asserted that she should have received legal title (rather than an easement only) to a 25.564-square-metre area of land at the side of her fourplex (the side yard).

[11] The Program contacted Town-Wood's president, Antonio Guglietti.

[12] On August 6, 1997, Mr. Guglietti wrote to Ms. Gourlay and acknowledged that Town-Wood had accidentally failed to include a right of way for access with the transfer deed and advised Ms. Gourlay that Town-Wood had obtained a right of way for access and enclosed a copy of the document providing access. The form was ready for registration. Ms. Gourlay has never registered the document granting access to the side yard.

[13] In his affidavit, sworn August 27, 1998, Antonio Guglietti, president of Town-Wood Homes Limited, deposed:

14. It was always the intention of Town-Wood to convey ownership of the access route to the rear-unit owner.

15. In order to complete Donna Gourlay's title, on or about October 31, 1997, I delivered to Donna Gourlay a Transfer of Access Right-of-Way (the "Transfer"), executed by the rear unit owner, Lori Cullen, to be registered by Donna G. Gourlay's solicitor. Attached hereto to this my affidavit and marked as Exhibit "G" (Tab 9), is a true copy of my correspondence to Donna G. Gourlay, and a true copy of the enclosed form of transfer.

16. The Ontario New Home Warranty Program was satisfied with this solution as can be seen in its letter dated May 21, 1998, to Donna Gourlay. Attached hereto to this my affidavit and marked as Exhibit "H" (Tab 10) is a true copy of this letter.

17. Out of the 65 quattroplex units sold to purchasers who were represented by solicitors, only Donna Gourlay has taken the position that there is a defect in title involving their quattroplex unit.

18. 35 out of 65 quattroplexes have front entrances for each of the two front-unit owners. Accordingly, each of the rear- unit owners have an exclusive side-entrance. Of the 30 quattroplex buildings with front-units having side entrances, one of which contains the Gourlay unit, access was reconfigured to the side of the building rather than the front, resulting in an access route over the side-yard for the front-unit owner. This access route is achieved by way of an easement, as the side-yard is owned by the rear unit owner.

19. It is apparent from By-law 151-88 and from the photographs of the Gourlay quattroplex, that the quattroplex was built in compliance with the By-law's requirements. Attached hereto to this my affidavit and marked as Exhibit "K" (Tab 13) are true copies of photographs of the Gourlay quattroplex, taken August 15, 1998.

20. Also apparent from Schedule "L" to the Agreement is that the 1.2 meter side yard exists adjacent to the front unit, though it was intentionally deeded to the rear unit owner, rather than to the front-unit owner who was to receive an easement.

[14] Ms. Gourlay continued to claim that she should have obtained title to the side yard.

[15] Ms. Gourlay's claim is based on the fact that Schedule "Q" was appended to the agreement. It is an artist's depiction of Lot 108 -- it does not set out metes and bounds and does not divide Lot 108 into parts. Schedule "Q" was not appended to define/show property limits -- that was done by the documents sent to her solicitor by the solicitor for Town-Wood.

[16] On April 15, 1998, Ms. Gourlay completed a conciliation request form and claimed compensation from the Program for "financial loss" resulting from Town-Wood's alleged failure to convey to her title to the side yard.

[17] In its letter of May 21, 1998, the Program denied Ms. Gourlay's claim under s. 14 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the "Act"). The Program took the position that:

(a) Pursuant to the agreement, the survey and the transfer deed, Town-Wood was only required to transfer Part 37 to Ms. Gourlay. Therefore, Ms. Gourlay received exactly what she had agreed to purchase and Town-Wood had agreed to sell.

(b) In any event, the doctrine of merger applied.

(c) Ms. Gourlay was an "owner" within the meaning of the Act and thus was not entitled to make a claim under s. 14(1)(a) of the Act and, because of the nature of the claim, it did not fall under s. 13(1)(a) of the Act.

[18] By letter, dated May 26, 1998, Ms. Gourlay appealed the Program's decision to CRAT. The appeal was heard on September 9, 1998.

[19] As a result of the words/actions of the Gourlays, Town- Wood commenced an action (Toronto -- 98BN03252) against the Gourlays for defamation. In that action, the Gourlays counterclaimed and claimed the same relief as claimed against the Program. Town-Wood moved for summary judgment to dismiss the counterclaim.

[20] On September 17, 1998, Ferrier J. dismissed Gourlay's counterclaim; he held:

. . . it is apparent from the agreement of purchase and sale, schedule L and the survey (all of which were reviewed by her solicitor prior to closing) . . . she [Gourlay] appears to have got what she bargained for.

Alternatively, if the document identified as "schedule Q" amounts to a representation . . . the doctrine of merger nevertheless applies.

[21] On the same day as Ferrier J. dismissed the Gourlay counterclaim (September 17, 1998), CRAT allowed the appeal from the Program and ordered it to acquire "the transfer of title to Parts 35 and 36 to the applicant (Gourlay), or, if unable to acquire such title by a date that is 60 days from the date of release of this Decision, to pay to the Applicant the sum of $4,889.12, plus any applicable taxes. Either action shall fully discharge the Program's obligations under this order".

III. The Applicable Section of the [Ontario New Home Warranties Plan Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-o31/latest/rso-1990-c-o31.html)

14. (1) Where,

(a) a person who has entered into a contract with a vendor for the provision of a home has a cause of action in damages against the vendor for financial loss resulting from the bankruptcy of the vendor or the vendor's failure to perform the contract;

(b) an owner has a cause of action against the vendor for damages resulting from a breach of warranty; or

(c) the owner suffers damage because of a major structural defect as defined in the regulations for the purposes of section 13, and the claim is made within four years after the warranty expires or such longer time under such conditions as are prescribed,

the person or owner is entitled to be paid out of the guarantee fund the amount of such damage subject to such limits as are fixed by the regulations.

[22] CRAT's decision correctly held that s. 14(1)(b) and (c) of the Act do not include any warranty for deficiencies in the amount of land sold or conveyed. Thus, the claim, if any, must fit into s. 14(1)(a).

IV. Conclusions

[23] Section 14(1)(a) of the Act is intended to protect those who contract with a vendor and suffer financial loss where the vendor/builder never completes the transaction. Here, CRAT erred in applying s. 14(l)(a) to a situation where the transfer had been completed. The claim of Ms. Gourlay is for an alleged deficiency in the quantity of land conveyed.

[24] CRAT in making the impugned order is compensating for alleged deficiencies in matters of title.

[25] In the following cases, CRAT had previously correctly held that 5. 14(1)(a) of the Act was not intended to compensate any and every breach of contract but was intended to cover "financial loss" when the vendor had failed to complete the contract:

-- Re Lu, [1994] O.C.R.A.T.D. No. 86;

-- Re Armstrong, [1995] O.C.R.A.T.D. No. 32;

-- Re Legacy, [1991] O.C.R.A.T.D. (1991) C.R.A.T. 790;

-- Re Greenberg, [1997] O.C.R.A.T.D. No. 148 affirmed (November 22, 1998) (Div. Ct.);

-- Re Kaminski, [1994] O.C.R.A.T.D. No. 126.

[26] It is our view that CRAT erred in concluding that the Gourlay claim fell under s. 14(1)(a) of the Act.

[27] On the record before us, we echo what Ferrier J. said on September 17, 1998: "Ms. Gourlay got what she bargained for and that if Schedule "Q" amounts to a representation, the doctrine of merger applies". See:

1. Fraser-Reid v. Droumtsekas, 1979 55 (SCC), [1980] 1 S.C.R. 720, 103 D.L.R. (3d) 385 at pp. 394, 397

2. Thompson v. Trepil Realty Ltd., 1962 208 (ON SC), [1962] O.R. 956 at p. 958, 34 D.L.R. (2d) 697 (H.C.J.) per Fraser J.

3. Richview Construction Co. v. Raspa (1975), 1975 720 (ON CA), 11 O.R. (2d) 377 at p. 387, 66 D.L.R. (3d) 193 (C.A.)

4. DiCenzo Construction Co. v. Glassco (1978), 1978 1472 (ON CA), 21 O.R. (2d) 186 at p. 199, 90 D.L.R. (3d) 127 (C.A.); leave to appeal to S.C.C. refused:

Finality and certainty in business requires that this be the case. The acceptance of the conveyance marks the transition from an executory to an executed contract.

V. Result

[28] The appeal is allowed, the decision of CRAT, dated September 17, 1998, is set aside and the decision of the Program as set out in its letter of May 21, 1998 to Ms. Gourlay is restored.

VI. Costs

[29] The respondent, Ms. Gourlay, shall forthwith pay to the Program costs of this appeal in the sum of $3,000 and to Town- Wood Homes Limited the sum of $1,000.

Order accordingly.