CITATION: McKee v. Tarion Warranty Corp., 2026 ONSC 205
DIVISIONAL COURT FILE NO.: 304/25
DATE: 20260115
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Lococo, Nakatsuru and Kurz JJ.
BETWEEN:
john mckee and nathalie mckee
Appellants
– and –
tarion warranty corporation and Greystone villages inc.
Respondents
Christina Barbato and Stephen Simpson, for the Appellants
Carling Chan, for the Respondent Tarion Warranty Corporation
Roberto D. Abrurto and Conor McCarthy, for the Respondent Greystone Villages Inc.
HEARD at Toronto: October 27, 2025
REASONS FOR JUDGMENT
R. A. LOCOCO J.
I. Introduction
[1] The appellants John McKee and Nathalie McKee (the “McKees”) appeal the decision dated March 31, 2025 (the “LAT Decision”) of the Licence Appeal Tribunal (the “Tribunal” or the “LAT”), reported at 2025 25853 (ON LAT).
[2] The McKees submitted claims to the respondent Tarion Warranty Corporation (“Tarion”) for breach of statutory new home warranties under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “ONHWPA”). The claims related to moisture-related defects in the exterior brick cladding of the McKees’ new home. The respondent Greystone Village Inc. (“Greystone” or the “Builder”) was the home’s builder and vendor.
[3] In a decision letter dated August 8, 2024 (the “Tarion Decision”), Tarion denied the McKees’ claims, after they refused Tarion’s offer of $14,800 (plus HST upon receipt of paid repair invoices) to resolve the warranted defects. On appeal to the Tribunal, the McKees argued that Tarion’s compensation offer was insufficient because the home’s entire exterior brick cladding needed to be replaced at a cost in the range of $200,000 to resolve the warranted defects.
[4] In the LAT Decision, the Tribunal rejected the McKees’ position. The Tribunal found that the McKees were entitled to $16,724 ($14,800 plus HST) from the guarantee fund established under the ONHWPA (the “Guarantee Fund”) for damages arising from the warranted defects.
[5] The McKees submit that the Tribunal erred in law, including by applying the wrong legal test, when assessing the amount of damages arising from warranted defects. They ask the court to set aside the LAT Decision and order Tarion to pay the McKees over $200,000 from the Guarantee Fund for breach of statutory warranties.
[6] For the reasons below, I would dismiss the appeal.
II. The statutory scheme
[7] The ONHWPA is consumer protection legislation that imposes mandatory statutory warranties on vendors of new homes under the Ontario New Home Warranties and Protection Plan. Among other things, the ONHWPA provides for the payment of compensation to a new homeowner where the vendor of their home has failed to honour the warranties: ONHWPA, s. 14.
[8] Tarion is a not-for-profit corporation designated under the ONHWPA to administer the statutory warranties: see ONHWPA, ss. 2(1), 11(1); Designation of Corporation, O. Reg. 273/04, s. 1.
[9] The statutory warranties remain in effect for up to seven years from the date of possession by the first owner, as set out in the ONHWPA and Administration of the Plan, R.R.O. 1990, Reg. 892 (“Reg. 892”). Under that legislation, there are warranties that apply for one year (“one-year warranty” or “year-end warranty”), two years (“two-year warranty”) and seven years from the warranty commencement date. According to the Tribunal, the warranty in issue before the Tribunal was the one-year warranty: LAT Decision, at para. 1.
[10] Subject to certain exclusions, the statutory warranties include warranties for workmanlike construction, freedom from defects in material, fitness for habitation, compliance with the Building Code[^1], freedom from water penetration, and freedom from major structural defects.
[11] Section 13(1) of the ONHWPA provides:
Warranties
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.
[12] Sections 15(2)(a) and (3) of Reg. 892 provides a narrower, two-year warranty relating to water penetration. Sections 15(2)(a) and 15(3) provided:
15 (2) Every vendor of a new home warrants to the owner,
(a) that the home is constructed in a workmanlike manner and is free from defects in materials including windows, doors and caulking such that the building envelope of the home prevents water penetration;
(3) The warranties described in subsection (2) apply only in respect of claims made during a two-year warranty period ending on the second anniversary of the date of possession….
[Emphasis added.]
[13] The term “building envelope” is defined in s. 15(1):
“building envelope” means the wall and roof assemblies that contain the building space, and includes all those elements of the assembly that contribute to the separation of the outdoor and indoor environments so that the indoor environment can be controlled within acceptable limits;
[14] To qualify for statutory warranty coverage, an owner must submit a statutory warranty form to Tarion within the applicable warranty period and describe on the warranty form the symptom giving rise to the specific concern in the claim: Reg. 892, ss. 4.2 to 4.6; ONHWPA, s. 14(5.1).
[15] The vendor is afforded an opportunity to resolve the claim items that a homeowner reports. If the homeowner is not satisfied that the vendor has resolved the claim items, the homeowner can request that Tarion conduct a conciliation to assess the claim items and determine whether the vendor has breached a statutory warranty: Reg. 892, ss. 4.2 to 4.6. In these reasons, (i) a claim item that is found to be subject to a statutory warranty is sometimes referred to as a “warranted claim” or a “warranted defect”, and (ii) the terms “warranted” and “warrantable” are used interchangeably to mean the same thing, that is, covered by a statutory warranty.
[16] If Tarion determines that the vendor has breached a statutory warranty, the vendor is afforded a further opportunity to resolve the breach. If the vendor fails to do so, Tarion will resolve the breach directly with the homeowner, either by payment of compensation out of the Guarantee Fund or by effecting repairs: Reg. 892, ss. 5.1(3), 5.1(4).
[17] Compensation for a breach of warranty has statutory limits. A homeowner is entitled to be paid out of the Guarantee Fund for the cost of repair for the warranted defect, and Tarion has no liability for any other damage, direct or indirect: Reg. 892, ss. 6(3), 6(6).
[18] If a homeowner disagrees with a decision by Tarion, the homeowner has an as-of-right appeal to the Tribunal, in which the homeowner has the onus to prove on a balance of probabilities that there is a breach of warranty and the damages caused by the breach: see ONHWPA, ss. 14(3), 14(4); Gill v. Tarion Warranty Corp., 2010 ONSC 1180, 275 O.A.C. 150 (Div. Ct.), at para. 6, leave to appeal refused, [2010] S.C.C.A No. 491.
[19] A party to an appeal before the Tribunal under the ONHWPA may appeal from the Tribunal’s appeal decision to the Divisional Court: Licence Appeal Tribunal Act, 1999, S.O. 1999, c. 12, Sched. G (the “LAT Act”), s. 11(1).
III. Factual background
[20] The McKees took possession of their new home on March 12, 2020. That date was the start date of the vendor’s statutory warranties under the ONHWPA. Greystone was the home’s builder and vendor.
[21] Subsequent to taking possession, the McKees submitted statutory warranty forms to Tarion with respect to alleged defects in the building’s exterior brick cladding. The McKees’ claims were not resolved to their satisfaction, ultimately leading to the LAT Decision currently under appeal to this court. The circumstances leading to the LAT proceedings are set out in detail in para. 13 of the LAT Decision, as summarized below.
[22] On April 11, 2020, the McKees submitted a 30-day statutory warranty form, which included claim items regarding the front exterior of the building: LAT Decision, at para. 13(ii). In that form, the McKees reported:
Efflorescence (typically a white powdery film) present on masonry exterior finishes, front right; the windowsill of the master bedroom, front exterior had not been installed, weep holes were missing, front right exterior, the brick cladding was persistently wet, most prominently on the front left; and poor workmanship of brick installation.
[23] On March 12, 2021, the McKees submitted a year-end warranty form [see Reg. 892, s. 4(3)], which included the two claim items (items 44 and 45) that were in dispute at the subsequent LAT hearing: LAT Decision, at paras. 13(iv). Claim items 44 and 45 provided:
44 Exterior - Building Face/Exterior - Cladding (Brick, Siding, Stucco, etc.) - Efflorescence is present on masonry exterior finishes. Front Right.
45 Exterior - Building Face/Exterior - Cladding (Brick, Siding, Stucco, etc.) - Brick remains persistently wet. Front of home. Most prominent front Left.
[24] The McKees were not satisfied that the Builder addressed the reported defects and requested a conciliation inspection. Tarion conducted an inspection but was not able to assess the condition of the brick and masonry. Tarion then organized an independent consultant, Pinchin Ltd., to investigate the reported defects with the brick efflorescence and persistent wetness of the brick veneer: see LAT Decision, at paras. 13(v) to (vi).
[25] After inspecting the reported masonry/brick issues, Pinchin issued a report dated April 18, 2023, opining that “the staining and wet conditions are attributable to a combination of insufficient drainage, cracked/deteriorated mortar joints, and negatively sloped windowsill”: LAT Decision, at para. 13(vii).
[26] Following Pinchin’s report, Tarion issued its Conciliation Assessment Report dated June 12, 2023, stating that claim items 44 and 45 were warranted, that is, that the reported items constituted defects in work and material that breached the one-year warranty: see LAT Decision, at para. 13(viii).
[27] Following the Tarion Conciliation Assessment Report, the Builder offered the McKees a cash settlement of $16,568.50, which the McKees declined. The offer was to address the windowsill defects and efflorescence on the entire front side brick cladding, based on a quote the McKees had obtained from Integrity Masonry Inc. on September 19, 2022: LAT Decision, at para. 13(ix).
[28] The McKees then engaged another consultant, Ottawa Structural Engineering Services Inc. (“OSES”), to investigate the construction defects. As set out in the LAT Decision, at para. 13(x), OSES issued a report on August 31, 2023, in which OSES recommended that:
… the bottom 12 courses of brick around the house be replaced, along with new, properly installed Blueskin flashing and weep holes. OSES recommended at least two exploratory openings be made in the veneer to verify the quantity and spacing of brick ties and if the ties were found to not be in accordance the OBC then the entire brick veneer should be replaced.
[29] The warranted defects being unresolved following the Tarion Conciliation Assessment Report and the builder repair period, Tarion retained Capacity Engineering Ltd. (“CEL”) to investigate the deficiencies and provide a scope of work to remedy them. Tarion’s purpose in retaining CEL was to provide a basis for offering compensation to the McKees to resolve the claims. CEL recommended further exploratory work, including at least three exploratory openings in the lower courses of brick, as well as removal and resetting of the masonry windowsill at the front master bedroom window to ensure it was compliant with the Building Code: LAT Decision, at paras. 13(xi), 33.
[30] After arranging for the exploratory openings and removal of the windowsill, CEL conducted a second investigation and from it developed a scope of work to remedy the defects, as set out in its report dated May 13, 2024. The scope of work involved removing and reinstalling the master bedroom windowsill, installing new through-wall flashing at the same location, and tinting the entire front masonry veneer. Based on the scope of work proposed in the CEL report, Cinanni Construction Ltd. developed a quote/estimate (the “Cinanni quote”) in the amount of $14,800 plus HST to remedy the warranted defects: LAT Decision, at paras. 13(xii), 13(xiv) to (v).
[31] After reviewing the CEL report, OSES (the McKees’ consultant) issued its findings and recommendations in a report dated May 29, 2024. OSES recommended that all the brick veneer on the home be replaced and the improperly installed front windowsill be removed and rebuilt with proper slope and flashing: LAT Decision, at para. 13(xiii).
[32] On July 23, 2024, Tarion provided the McKees with a claims inspection report, which included an offer of compensation from the Guarantee Fund based on the Cinanni quote: LAT Decision, at paras. 13(xiv). The offered compensation also included reimbursement of HST paid to have the defects repaired, once the work was completed. The proposed settlement was subsequently confirmed in Tarion’s letter to the McKees dated August 23, 2024, with the subject line “Compensation Offer”.
[33] On August 8, 2024, Tarion issued the Tarion Decision, denying the McKees’ claim. The Tarion Decision noted, among other things, “[t]he builder offered to repair the warranted defects during the builder repair period, but you declined this repair. Tarion has offered you $14,800.00 to resolve the warranted defects, which is based on the quote provided by CEL. You have not accepted that offer.”
IV. Appeal to the Tribunal
[34] By Notice of Appeal dated August 14, 2024, the McKees appealed the Tarion Decision to the Tribunal.
[35] Following a case conference before LAT Member Rupinder Hans on October 2, 2024, the Tribunal released the Case Conference Report and Order on October 11, 2024. Among other things, that report and order (i) added Greystone as a party, (ii) scheduled a videoconference appeal hearing for four days in February 2025, (iii) stated that the issue to be determined was “the amount of damages to which the appellants are entitled in relation to the items the respondent [Tarion] accepts as warranted”, (iv) stated that the onus was on the McKees to prove, on a balance of probabilities, that they were entitled to the amount of damages claimed, and (v) stated that all orders were made on consent unless otherwise noted.
[36] The appeal hearing proceeded as scheduled for four days in February 2025 before Adjudicator Bruce Stanton. The evidence included testimony by eight witnesses (including three expert engineering witnesses) and extensive documentary evidence (including five engineering reports). As set out in the LAT Decision, at para. 3, the Tribunal confirmed that the issue to be determined was:
What is the amount of damages that the appellants are entitled to in relation to the two claim items [44 and 45] Tarion deems warranted, i.e. arising from the breaches of warranty?
[37] Before the Tribunal, there was no dispute that claim items 44 and 45 represented breaches of the Builder’s statutory warranties: LAT Decision, at para. 5.
[38] In the LAT Decision, at paras. 9-10, the Tribunal summarized the parties’ contrasting positions relating to the extent of compensation that should be paid to the McKees to remedy the warranted defects. The position of Tarion and the Builder was that the offered compensation of $14,800 plus HST was sufficient to remedy the warranted defects of persistent wetness and efflorescence on the brick veneer on the front of the home. The McKees’ position was that a complete rebrick of the home was required to remedy the warranted defects, at an estimated cost in the range of $200,000.
[39] As the Tribunal stated, at paras. 9-10:
[9] The appellants reported on their Year-End claim form their concern that the brick veneer on the front of their new home was persistently wet and discoloured. After undertaking their own investigations of the brick cladding, they concluded that poor workmanship in the construction of the brick veneer was preventing the cavity between it and the inner supporting wall from draining and drying properly. They claim that poor workmanship in the brick veneer is resulting in excess moisture in the cavity on all sides of the home and the veneer was not properly secured, citing insufficient and improperly spaced brick ties. They seek a complete re-bricking of the home, estimated to be cost between $173,000.00 and $220,000.00.
[10] Tarion and Builder claim that the persistent wetness and efflorescence is limited to the front (south-facing) wall of the home where flaws (negatively sloped windowsill and improper through-wall flashing) in the installation of the second floor, master bedroom windowsill is creating excess moisture in the air cavity (between the veneer and inner wall) below the sill. They propose correcting the windowsill issue and tinting all the brick on the front wall to correct efflorescence and discolouration. Tarion has offered $14,800.00 in compensation to the appellants to undertake the windowsill repair and tinting, which they have refused.
[40] Before the Tribunal, the position of Tarion and the Builder was that the cost of repairing the warranted defects was $16,724, based on the scope of work outlined in the CEL report. The compensation amount included costs for (i) removing and replacing the windowsill with new detail that ensured adequate drainage to the nearest weep hole, and (ii) tinting the front masonry veneer: see LAT Decision, at paras. 11, 47.
[41] The Tribunal agreed, as set out in the LAT Decision, at paras. 56-58:
[56] I find, on a balance of probabilities, that the amount of damages associated with the warranted defects is $16,724.00, which is representative of the Cinanni Construction quote of $14,800.00 plus HST.
[57] I find that the amount of damages is confined to the problem of persistent wetness and efflorescence of the brick veneer on the front of the home, as reported in the Year-end claim form. I disagree with the appellants’ argument that Tarion’s inspection of the functioning and quality of the brick veneer on the other walls of the home broadens the scope of the claim items.
[58] The evidence before me suggests that the brick veneer on the other sides of the house is functioning well.
[42] In reaching those conclusions, the Tribunal considered evidence that included the structural engineering evidence of representatives of CEL (Mr. Quinn, retained by Tarion) and OESA (Mr. Yakoub, retained by the McKees): LAT Decision, at para. 59-65. The Tribunal preferred the conclusions in the CEL report, confining the amount of damages to the issues with the brick veneer at the front of the house: LAT Decision, at para. 59. The Tribunal gave little weight to the conclusion of the OSES representative that the entire house needed to be rebricked, noting that (i) OSES proposed more exploratory openings to determine if a complete rebrick was warranted (not subsequently pursued), and (ii) the McKees asked OSES to undertake a structural inspection of the entire brick veneer, which was broader than the warranted defects: LAT Decision, at paras. 61-62.
[43] At para. 62, the Tribunal also noted that the structural inspection that the McKees requested OSES to undertake involved “analysis centred more on OBC compliance and less on whether the existing cladding system was actually functioning properly.” In contrast, the Tribunal stated that CEL’s representative “noted that, when it comes to OBC compliance, an ‘acceptable solution’ is deemed to satisfy the OBC and stressed that ‘function’ is what matters most”: LAT Decision, at para. 62.
[44] The Tribunal concluded that the McKees are entitled to $16,724 as damages arising from the warranted defects in claim items 44 and 45 and ordered Tarion to provide compensation to the McKees in that amount: LAT Decision, at paras. 75-76.
V. Appeal from the LAT Decision
A. Jurisdiction and standard of review
[45] By Notice of Appeal dated April 21, 2025, the McKees appeal the LAT Decision. The Divisional Court has jurisdiction to hear the appeal: LAT Act, s. 11(1).
[46] On appeal from an administrative decision, the appellate standards of review apply, as set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8, 10, 19, 26-37: see Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 37.
[47] The standard of review is correctness for questions of law. The standard of review is palpable and overriding error for questions of fact and for questions of mixed fact and law except where there is an extricable question of law, which is reviewable on a correctness standard.
B. Issues to be determined
[48] The McKees submit that the Tribunal made reversible errors in the LAT Decision when assessing the damages arising from warrantable claims under the ONHWPA. They ask the court to set aside the LAT Decision and order Tarion to pay $217,129.50 to them for damages resulting from breach of statutory warranty.
[49] In their factum, the McKees submit that when assessing damages arising from warrantable claims, the Tribunal made (a) errors of law, including by applying the wrong legal test, and/or (b) palpable and overriding errors of fact that justify appellate intervention. However, during oral argument, the McKees’ counsel advised that the McKees are no longer alleging reversible errors of fact. Therefore, the only issue on appeal is whether the Tribunal made errors of law, including by applying the wrong legal test, when assessing the damages arising from warrantable claims.
[50] For the reasons below, I conclude that the McKees have not established that the Tribunal made reversible errors of law in the LAT Decision.
C. Appellants’ submissions
[51] By way of overview, the McKees submit there was a fundamental problem with the Tribunal’s legal analysis relating to the remedy for the warranted defects. They argue that in assessing the compensation that they should receive, the Tribunal was required to take a prescriptive approach by identifying the Builder’s warranty breaches and determining the damages resulting from those breaches. They submit that instead, the Tribunal erred in law by taking a functional approach, which provided a remedy only where there was visible moisture and discolouration arising from construction defects.
[52] Among other things, the McKees dispute the Tribunal’s characterization of the warranted defects as “persistent wetness and efflorescence” on the brick veneer at the front of the house: see LAT Decision, at paras. 11, 57. They argue that rather than being defects, the persistent wetness and efflorescence were symptoms of the construction defects: see Muskoka Standard Condominium Corp. No. 51 v. Tarion Warranty Corp., 2023 ONSC 1740 (Div. Ct.), at paras. 55-57. The McKees submit that s. 13(1) of the ONHWPA and s. 15(2)(a) of Reg. 892 warrant against defective construction, not just the visible symptoms of it. They say that the statutory warranty required the Builder to construct the home in such a way that there would be no persistent wetness or efflorescence. They submit that the Tribunal erred in law in assessing compensation by addressing only the symptoms rather than the underlying construction defects.
[53] The McKees accept that the Tribunal was correct in stating that there was no dispute that claim items 44 and 45 “represent breaches of the builder’s [statutory] warranty”: LAT Decision, at para. 5. However, they take issue with the further statement that the appeal to the Tribunal “centres on the extent of the defects [rather than the damages] associated with the two claims”: LAT Decision, at para. 5 (emphasis added). They say that by focusing on the “defects”, the Tribunal failed to recognize that the dispute was not solely about wet and discoloured brick on the front of the house. Rather, the dispute related to the damages arising from the Builder’s undisputed breach of warranty, which they say had consequences for the house’s entire brick veneer. The McKees argue that they should be fully compensated for those consequences.
[54] The McKees also submit that when assessing the amount of damages arising from the warrantable claims, the Tribunal erred in law by failing to apply the legal test set out in Ducas v. Tarion Warranty Corp., 2021 ONSC 5885, 25 C.L.R. (5th) 27 (Div. Ct.).
[55] In Ducas, the homeowner made a claim for statutory warranty coverage after water leaked periodically into the great room of her home. The claim was under the two-year warranty against water penetration through the building envelope in s. 15(2)(a) of Reg. 892 (defined in Ducas as the “Two-Year Warranty”). Tarion denied the homeowner’s claim and she appealed Tarion’s decision to the Tribunal: Ducas, at paras. 2, 8.
[56] In its decision, the Tribunal found that Ms. Ducas had established three violations of the statutory warranty but declined her request for an order that Tarion “ensure that the necessary repairs be completed to correct the water penetration problem”. Instead, the Tribunal directed Tarion to “carry out repairs to rectify the Violations”: Ducas, at paras. 10-11.
[57] The builder and the homeowner both appealed the Tribunal’s decision to the Divisional Court. The court dismissed both appeals. At para. 13 of Ducas, the court set out the requirements to establish an entitlement under s. 15(2)(a) of Reg. 892 in that case:
On a plain reading of s. 15(2)(a) of [Reg. 892], there are two requirements to establish an entitlement to the Two-Year Warranty: (1) demonstration of a failure to construct the home in a workmanlike manner (I ignore defects in materials as they are not relevant to these appeals); and (2) demonstration that the result of such failure is that the building envelope of the house does not prevent water penetration.
[58] The court found that the Tribunal did not err in law in the application of s. 15(2)(a) in that case: see Ducas, at paras. 24-32. In doing so, the court, at para. 27, rejected the position of Tarion and the builder that the language of s. 15(2)(a) “requires a claimant to establish a causal connection between a construction defect and an actual event of water penetration.” At paras. 27-28, the court continued:
… I see nothing in the language of s. 15(2)(a) of [Reg. 892] that compels such an interpretation. On a plain reading, the phrase “such that the building envelope of the home prevents water penetration” requires no more than a failure of the building envelope to prevent water leakage that is consistent with a demonstrated non-compliance with OBC requirements that are designed to prevent such occurrence. The phrase does not contemplate, much less require, demonstration of a causal connection between a non-compliant construction element and an actual episode of water penetration.
Further, the Respondents’ interpretation is inconsistent with the purpose of [s. 15(2)(a)]. A new homeowner is entitled to receive a house that has been constructed in accordance with the OBC requirements that are designed to prevent or minimize water penetration. If a builder fails to comply with OBC requirements designed to prevent water leakage in the construction of a new home, the homeowner’s entitlement to a warranty should not depend upon an actual incident of water leakage within two years of construction. Nor should it depend upon the establishment of a causal connection between the non-compliant construction element and a particular incident of water leakage or upon identification of the location of the water penetration.
[59] Relying on Ducas, the McKees submit that when assessing the amount of damages arising from the warrantable claims, the Tribunal erred in law by failing to apply the following two-part test for establishing entitlement under the statutory warranty:
a. Have the homeowners demonstrated that the builder failed to construct the home in a workmanlike matter?
b. If so, were the specific Building Code requirements that were contravened designed to prevent or minimize water penetration into the building envelope?
[60] The McKees submit that if the Tribunal had applied that test, it would have answered “yes” to both those questions on the evidence before it. The McKees say that instead, the Tribunal erred in law by requiring proof of a causal link between a construction defect and an actual water leak to claim warranty damages. As noted above, the Divisional Court rejected that approach: Ducas, at paras. 27-28.
D. Respondents’ submissions
[61] Briefly stated, the respondents submit that the McKees have not discharged their onus establishing that the Tribunal made reversible errors of law in the LAT Decision.
[62] The Builder also argues that the McKees raise entirely new issues on appeal that were not raised before the Tribunal including reliance on the test in Ducas and taking a functional rather than prescriptive approach in its legal analysis. They say that the court should decline to consider the McKees’ submissions on those issues, in accordance with the principles that the Court of Appeal for Ontario set out in Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130, at para. 18; see also Becker v. Toronto (City), 2020 ONCA 607, 452 D.L.R. (4th) 679, at paras. 35, 39-40.
[63] If the court decides to consider the McKees’ submissions on those two issues, the Builder joins with Tarion in submitting that the Tribunal did not err in law in its conclusions on those issues. With respect to the functional approach to legal analysis, the Builder notes among other things that the Tribunal has previously accepted evidence that satisfying the functional statements in the Building Code (as an acceptable alternative solution to what would otherwise be required) is sufficient to establish compliance: see 7496 v. Tarion Warranty Corp., 2013 24103 (ON LAT).
VI. Analysis and conclusions
[64] I conclude that the McKees have not discharged their onus of establishing that the Tribunal made reversible errors of law in the LAT Decision. I reach that conclusion on the merits of the case after consideration of the parties’ submissions to this court and the record before the Tribunal. Therefore, it is not necessary to determine whether the McKees raised new issues on appeal that were not properly before the court, as discussed further below.
A. The Tribunal did not err in law in its consideration of the scope of damages
[65] In their submissions before us, the parties agree that the issue to be determined before the Tribunal was correctly set out in the LAT Decision, at para. 3, that is, the amount of damages that the McKees were entitled to receive relating to claim items 44 and 45 that “Tarion deems warranted, i.e. arising from the breaches of warranty.” The parties’ agreement on that matter is not surprising. The Tribunal had previously identified the same issue for the adjudicator’s determination in a consent order in its Case Conference Report and Order released October 11, 2024.
[66] It is also not disputed that claim items 44 and 45 “represent breaches of the builder’s [statutory] warranty”: LAT Decision, at para. 5. In the Tarion Conciliation Assessment Report dated June 12, 2023, Tarion previously found that items 44 and 45 constituted defects in work and material that breached the “One Year Workmanship Warranty and the One Year Materials Warranty”. Those warranted items related to efflorescence (item 44) and persistent wetness (item 45) on the exterior cladding on the front of the house. As stated in the Tarion Decision dated August 8, 2024, the McKees declined the Builder’s offer of $14,800 to resolve the “warranted defects”. The McKees also declined Tarion’s offer of compensation from the Guarantee Fund in the amount of $14,800 plus reimbursement of HST paid to have the defects repaired. Those offers reflected the amount set out in the Cinanni quote to effect repairs to the front of the house, based on the scope of work proposed in the CEL report.
[67] On appeal of the Tarion Decision to the Tribunal and again on appeal to this court, the McKees’ position has been that to repair the warranted defects, it is necessary to rebrick the whole house at a cost in the range of $200,000. They say that the Tribunal erred in law in reaching the conclusion that repairs to the front of the house would be sufficient to remedy the warranted defects. They submit that the Tribunal applied the wrong legal test in its analysis.
[68] I disagree.
[69] Warranty coverage of items 44 and 45 having been determined, the Tribunal’s task was to determine the damages payable to the McKees from the Guaranty Fund relating to efflorescence and persistent wetness on the exterior cladding on the front of the house. Consistent with s. 14(3) of the ONHWPA and Gill, at para. 6, the Tribunal correctly stated the applicable test, at para. 11 of the LAT Decision:
The appellants have the burden of demonstrating, on a balance of probabilities, that the amount of damages arising from the warranted defects (persistent wetness and efflorescence) on the brick on the front of their home exceeds the value offered by Tarion.
[70] Contrary to the McKees’ submission, the Tribunal properly considered the scope of damages. The Tribunal’s jurisdiction is limited to considering items the homeowner claims within the warranty period and about which Tarion made a decision relating to coverage and compensation: Gale v. Tarion Warranty Corp., 2024 102090 (ON LAT), at para. 74; Toronto Standard Condominium Corp. No. 2541 and Tarion Warranty Corp., 2022 78805 (ON LAT), at para. 113; Ragoobar v. Tarion Warranty Corp., 2022 46851 (ON LAT), at para. 235. Matters not related to the reported defects are not within the scope of an appeal to the Tribunal: Gale, at para. 75.
[71] Among other things, the McKees dispute the Tribunal’s use of the word “defects” instead of “damages” in the following statement: “the dispute in this appeal centres on the extent of the defects associated with the two claims”: LAT Decision, at para. 5. I do not agree that doing so demonstrates a misunderstanding of the law. The words “associated with the two claims” connotes an awareness that a damages award will need to consider the extent of the defects included within the warranted items – and correspondingly exclude alleged defects beyond them.
[72] Before the Tribunal, the McKees sought to expand the scope of their damages to include remedies for alleged defects beyond the warranted items. The Tribunal correctly recognized that it was beyond its jurisdiction to do so, finding that “the amount of damages is confined to the problem of persistent wetness and efflorescence of the brick veneer on the front of the home, as reported in the Year-end claim form”: LAT Decision, at para. 57
[73] As well, a remedy under the ONHWPA must be proportional: Grewal v. Tarion Warranty Corp., 2023 110955 (ON LAT), at para. 30. A complete rebrick of the home is disproportionate and overbroad in response to the warranted defects in this case. The onus was on the McKees to establish, on a balance of probabilities, that their desired remedy was necessary and appropriate to correct the items identified as being covered by the warranty: Grewal, at para. 46; 9632 v. Tarion Warranty Corp., 2018 117014 (ON LAT), at para. 23. The Tribunal did not err in law in finding that the McKees failed to do so.
B. The Tribunal did not err in failing to apply the legal test in Ducas
[74] A specific error of law that the McKees allege is the Tribunal’s failure to apply the legal test set out in Ducas. I conclude that the legal test in the Ducas decision has no application in this case.
[75] First, the dispute in Ducas related to an alleged breach of the two-year warranty in s. 15(2)(a) of the Reg. 892 relating to water penetration though the building envelope. At issue was whether there were construction defects that breached that warranty and caused the water leak, entitling the homeowners to compensation.
[76] In contrast, there is no dispute in the matter before us that there was warranty coverage for claim items 44 and 45. Tarion had already warranted those items under the one-year warranty relating to workmanship and materials. The issue before the Tribunal was the amount of damages flowing from those defects, not whether the reported defects were warranted. The Tribunal was not required to apply the test in Ducas because there was no reason for the Tribunal to determine whether the McKees would be entitled to two-year warranty coverage under s. 15(2)(a) of Reg. 892, which is a different and narrower warranty.
[77] Second, the passages that the McKees cited from Ducas were framed to fit the specific circumstances of that case, namely, a situation where water leaking into the home was the very essence of the reported defect and the source of the leak was in dispute. In these circumstances, the court determined that the homeowner need not prove a causal connection between the defects and the leak, framing its analysis in this way to fit the circumstances of actual water penetration.
[78] In contrast, in the matter before us, there was no evidence before the Tribunal that water was penetrating the building envelope. At para. 63, the Tribunal made a finding of fact that “[t]here are no reports of water infiltration from the brick veneer.”.
[79] In any case, contrary to the McKees’ submissions, I do not agree that the Tribunal required proof of a causal link between a construction defect and an actual water leak to claim warranty damages under the ONHWPA. The only mentions of water infiltration in the LAT Decision were in para. 40 and 63, where the Tribunal referred to “water infiltration” when summarizing and assessing the opinion of Mr. Quinn (the engineering expert Tarion retained) that the brick veneer system was functioning well.
[80] At para. 40 of the LAT Decision, the Tribunal summarized Mr. Quinn’s evidence:
- Quinn testified that he had read in the OSES report that the TWF/Blueskin was too short at the base of the veneer but disagrees that it is too short because it is functioning as anticipated. There is no sign of water and moisture build-up at the bottom of the veneer nor any indication of water infiltration into the home. [Emphasis added.]
[81] With respect to the evidence of the engineering expert retained by the McKees (Mr. Yakoub) the Tribunal stated, at paras. 61-64:
Although [Mr.] Yakoub is eminently qualified to provide an expert opinion on the brick cladding issues, I give little weight to his conclusion that the entire home must be rebricked because he proposed that more exploratory openings would be needed to determine if deficiencies such as brick ties and TWF merited a complete re-brick, and his inspection and assignment regarding the brick cladding was broader than the warranted defects.
The appellants asked Yakoub to undertake a structural inspection of the entire brick veneer and to identify what would be required for the brick cladding to comply with the OBC 2012 and other masonry codes. Consequently, his analysis centred more on OBC compliance and less on whether the existing cladding system was actually functioning properly. [Mr.] Quinn noted that, when it comes to OBC compliance, an “acceptable solution” is deemed to satisfy the OBC and stressed that “function” is what matters most.
In that regard, there are no reports of water infiltration from the brick veneer. There is no evidence of persistent wetness on the brick at any location other than below the front second-storey window. The lower courses of brick are not displaying any signs that water is being trapped behind the veneer due to blocked weepholes, excess mortar, or too narrow a cavity, nor that the Blueskin/TWF is not functioning properly.
I understand the appellants’ worries about the state of their home as described by the findings in the OSES report, however the testimony of [Mr.] Quinn and the two CEL reports provide a qualified counterpoint. The three exploratory openings revealed that the brick cladding on their home, despite any messiness behind the veneer, appears to be functioning as intended.
[Emphasis added.]
[82] It is clear from the passages above that the Tribunal did not require a causal link between a defect and an incident of water penetration to allow the McKees to claim warranty damages. The Tribunal merely stated that there were no reports of water infiltration as one of the bases for giving more weight to Mr. Quinn’s expert opinion that the brick veneer system was functioning properly. Other factors that the Tribunal considered in preferring Mr. Quinn’s opinion were the lack of evidence of persistent wetness at other locations around the house and no signs that water was being trapped behind the brick veneer.
C. The Tribunal did not err in law by taking a functional approach in its legal analysis
[83] I also see no merit in the McKees’ submission that the Tribunal erred in law by taking a functional rather than prescriptive approach in its analysis when determining the extent of the McKees’ damages.
[84] In their factum, the McKees’ raise this issue in the context of the Tribunal’s consideration of the evidence of Mr. Quinn relating to the proper functioning of the brick veneer: LAT Decision, at para. 62. As noted above, the McKees dispute the Tribunal’s preference for the evidence of Mr. Quinn (Tarion’s engineering expert) as being centred on “whether the existing cladding system was actually functioning properly” over that of Mr. Yakoub (the McKees’ engineering expert) being centred “more on OBC compliance”. The McKees take issue with the Tribunal’s acceptance of Mr. Quinn’s position that “when it comes to OBC compliance, an ‘acceptable solution’ is deemed to satisfy the OBC and stressed that ‘function’ is what matters most”.
[85] By way of background, Division B of the Building Code “contains the acceptable solutions” (emphasis in original) that meet the standard requirements of the Building Code: see Building Code, s. 1.1.1.2. Compliance with Division B is addressed in s. 1.2.1.1 of the Building Code, which provides:
1.2.1.1 Compliance with Division B
(1) Compliance with Division B shall be achieved,
(a) by complying with the applicable acceptable solutions in Division B, or
(b) by using alternative solutions that will achieve the level of performance required by the applicable acceptable solutions in respect of the objectives and functional statements attributed to the applicable acceptable solutions in MMAH Supplementary Standard SA-1, “Objectives and Functional Statements Attributed to the Acceptable Solutions”.
(2) For the purposes of Clause (1)(b), the level of performance in respect of a functional statement refers to the performance of the functional statement as it relates to the objective with which it is associated in MMAH Supplementary Standard SA-1, “Objectives and Functional Statements Attributed to the Acceptable Solutions”.
[Emphasis in original.]
[86] In s. 1.4.1.2(1) of the Building Code,
Acceptable solution means a requirement stated in Parts 3 to 12 of Division B.
Alternative solution means a substitute for an acceptable solution.
[Emphasis in original.]
[87] Section 2.1.1.1 of the Building Code sets out the required documentation relating to alternative solutions. Section 2.1.1.1(1) provides:
2.1.1.1. Documentation
(1) The person proposing the use of an alternative solution shall provide documentation to the chief building official or registered code agency that,
(a) identifies applicable objectives, functional statements and acceptable solutions, and
(b) establishes on the basis of past performance, tests described in Article 2.1.1.2. or other evaluation that the proposed alternative solution will achieve the level of performance required under Article 1.2.1.1. of Division A.
[Emphasis in original.]
[88] Section 1.1.1.1 of the Building Code provides: “Division A contains compliance and application provisions and the objectives and functional statements of this Code” (emphasis in original”).
[89] Section 1.1.1.3 of the Building Code provides: “Division C contains the administrative provisions of this Code”, which include procedural requirements relating to building permits.
[90] The McKees dispute that the Builder was entitled to rely on “acceptable solutions” (which include as substitutes “alternative solutions”) as an alternative to strict compliance with Division B of the Building Code unless the McKees’ home was constructed under a building permit issued with alternative solutions approved under Division C of the Building Code. The McKees say that no evidence was presented by the Builder or Tarion that the McKees’ home was built under a building permit with approved alternative solutions.
[91] The Builder does not dispute that there was no evidence before the Tribunal as to whether the McKees’ home was constructed under a building permit with approved alternative solutions under Division C. The explanation that the Builder provides is that compliance with Division C (as opposed to Division B) of the Building Code was not raised as an issue at the hearing. That was the case despite Mr. Quinn’s reliance on Building Code provisions relating to acceptable solutions (both in his oral testimony and in the CEL report that he approved and signed) to support his evidence that the objectives and functional statements of the Building Code were met. The Builder also notes that Mr. Quinn’s evidence was uncontested and that the McKees’ engineering expert (Mr. Yakoub) was not asked about this subject at the hearing.
[92] On that basis, the Builder submits the McKees submissions on that issue should not be entertained as being a new issue raised for the first time on appeal, in accordance with the principles set out by the Court of Appeal at Kaiman, at para. 18 and Becker, at paras. 35, 39-40.
[93] On the merits, I conclude that the Tribunal did not err in law by considering the provisions in the Building Code relating to “acceptable solutions” as one of the factors when considering whether it preferred the evidence of one engineering expert over the other about the proper functioning of the brick veneer. While I am sympathetic to the Builder’s argument that the McKees’ submissions on this issue are not properly before this court on appeal, it is unnecessary to decide this issue on that basis.
[94] Contrary to the McKees’ oral argument on appeal, I do not agree that the Tribunal’s legal analysis relating to the remedy for the warranted defects was fundamentally tainted by erroneously taking a functional rather than prescriptive approach. As explained above, the Tribunal’s comments about “acceptable solutions” related to a narrow issue regarding the Tribunal’s preference for the evidence of one expert witness over another. The Tribunal considered the expert witness’s evidence on this point together with other factors, notably the lack of evidence of persistent wetness at other locations around the house and no signs that water was trapped behind the brick veneer: LAT Decision, at para. 63. In these circumstances, I see no basis for concluding that the McKees have established a reversible error of law.
VII. Disposition
[95] Accordingly, I would dismiss the appeal. As the parties agreed, I would order the McKees to pay costs in the amount of (a) $10,000 all-inclusive to Tarion, and (b) $10,000 all-inclusive to the Builder.
___________________________ Lococo J.
___________________________ Nakatsuru J.
Kurz J.
Date: January 15, 2026.
CITATION: McKee v. Tarion Warranty Corp., 2026 ONSC 205
DIVISIONAL COURT FILE NO.: 304/25
DATE: 20260115
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Backhouse, Lococo and Jensen JJ.
BETWEEN:
john mckee and nathalie mckee
Appellants
– and –
tarion warranty corporation and Greystone villages inc.
Respondents
REASONS FOR JUDGMENT
R. A. LOCOCO J.
Date: January 15, 2026
[^1]: Building Code, O. Reg. 332/12 under the Building Code Act, 1992, S.O. 1992, c. 2. That regulation (superseded on January 1, 2025 by O. Reg. 163/24) was in effect at the time relevant to this matter. Reference to the Building Code in these reasons means O. Reg. 332/12. In the LAT Decision and other decisions or provisions quoted in these reasons, the Building Code is sometimes referred to as the “OBC” or the “Ontario Building Code".