SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-12-451063
DATE: 20140613

RE: TARION WARRANTY CORPORATION, Plaintiff, Defendant to the Counterclaim

AND:

FRANCOIS YVON LATREILLE and SAMIA BENMILOUD, Defendants, Plaintiffs by Counterclaim

BEFORE: Stinson J.

COUNSEL:
Neil S. Abbott and Heather Cohen, for the Plaintiff/Defendant by Counterclaim, responding party

Douglas R. Adams, for the Defendants, Plaintiffs by Counterclaim, moving parties

HEARD at Toronto: June 9, 2014

ENDORSEMENT

[1] This endorsement concerns a motion for summary judgment brought by the defendants. As argued, the motion principally raised legal issues concerning the interpretation and application of certain provisions of the Ontario New Home Warranties Plan Act, R.S.O. 1990 c. O.31 (the “ONHWP Act”).

[2] Tarion has commenced this action to recover monies it paid out of the Guarantee Fund established under the ONHWP Act in respect of warranty claims made by Ottawa Carleton Standard Condominium Corporation No. 737 (“OCC 737”). The warranty claims arose from alleged defects and deficiencies in the common elements of an 11 unit condominium apartment building in Ottawa (the “Condo Building”).

[3] The Condo Building was constructed by a now bankrupt corporation known as Domaines du Marché Inc. (“Domaines”). Domaines was registered with Tarion and was the builder, vendor and declarant of the condominium project. Domaines allegedly failed to repair the deficiencies that were claimed by OCC 737. As a result, Tarion paid the cost to repair the warranted deficiencies out of the Guarantee Fund and then invoiced Domaines for these amounts. Those invoices were paid, to the extent of $220,000, by way of a drawdown on a letter of credit posted by Domaines. The remaining sum, approximately $111,000, remains outstanding.

[4] The defendant Francois Yvon Latreille is the indemnitor of Domaines. In this action, Tarion is suing Mr. Latreille to recover the remaining $111,000, pursuant to his indemnity. Tarion is also suing the defendant Samia Benmiloud, who is the spouse of Mr. Latreille, to set aside an alleged fraudulent conveyance from Mr. Latreille to Ms. Benmiloud.

[5] The motion before me concerned various arguments advanced by Mr. Latreille in support of the proposition that OCC 737 has no right of action for breach of warranty under the ONHWP Act in respect of the repairs to the common elements, because OCC 737 does not fall within the warranty provisions of the ONHWP Act. The focus of the motion, therefore, was the determination of that question of law, namely, whether on the record before me Tarion has established liability as against Mr. Latreille. The parties agreed that if Mr. Latreille prevails on that issue, the entire action should be dismissed, since there will be no basis for a finding of liability against Mr. Latreille and, correspondingly, no basis for a fraudulent conveyance claim as against Ms. Benmiloud. On the other hand, if the record does establish liability as against Mr. Latreille, the parties agreed that the issue of quantification of Tarion’s claim will remain outstanding and the case will proceed, limited to that issue.

[6] There is also a counterclaim by Mr. Latreille for damages of $220,000 arising from the alleged improper drawdown of the letter of credit posted by Domaines. Subject to the quantification issue mentioned previously, this motion will also determine the legal entitlement of Tarion to draw down on that letter of credit for purposes of satisfying the alleged liability of Domaines and Mr. Latreille in respect of the warranty claims made by OCC 737 and the payments made by Tarion in relation to those claims.

[7] Subject to the proof and quantification of the actual deficiencies that were claimed by OCC 737 and paid by Tarion, I accept as accurate the facts recited in the responding party’s factum on this motion dated May 26, 2014 as recited in the following paragraphs:

Paragraphs 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25 and 26.

All those facts are established, to my satisfaction, based on the contents of the affidavit of Robert Fisher, the warranty services representative of Tarion. Save with respect to the quantification issue and the underlying liability issue, none of the evidence filed on behalf of the defendants contradicts the facts that are mentioned in the paragraphs that I have listed. I therefore make findings of fact consistent with the information contained in those paragraphs.

[8] I also accept the evidence of Shannon Martin in her affidavit sworn February 20, 2014. She was the lawyer who was retained by Domaines to create OCC 737. In particular, I accept that the property in question was turned into 11 residential units and common elements and that she effected transfer of title in the units and the common elements appurtenant thereto to the 11 unit owners. I also accept that there was no transfer of title to any unit or common element to OCC 737.

[9] As noted, the essence of the defendants’ argument is that OCC 737 was not entitled to the benefit of the warranty provisions contained in the ONHWP Act; Tarion was not required to honour the claims of OCC 737; correspondingly, Tarion was not entitled to invoice Domaines for the remedial work; and, finally, Tarion was not entitled to draw down on the letter of credit or to look to Mr. Latreille for the alleged shortfall, pursuant to his indemnity.

[10] On this motion, the defendants advanced various arguments in support of the proposition that a condominium corporation is not entitled to warranty coverage under the ONHWP Act in respect of common elements. The defendants’ arguments all entail the interpretation of the ONHWP Act. In interpreting the legislation, “it is the meaning that is most consistent with the plain reading of the words and with the purpose of the legislation that should be preferred”: Greater Toronto Home Builders’ Association v. Tarion Warranty Corp., [2006] O.J. No. 1030 at para. 9 (S.C.J.). The ONHWP Act should be given a broad and liberal interpretation: Ontario New Home Warranty Program v. Grant, [2001] O.J. No. 2972 at para. 70 (S.C.J.); affirmed [2002] O.J. No. 3460 (C.A.). As provided in the Legislation Act, 2006, S.O. 2006, c. 21, Sched. F, s. 64(1) every enactment “shall be interpreted as being remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects.”

[11] The narrow question raised by the argument of the defendants is whether the condominium corporation is an owner of the common elements for purposes of making a warranty claim. In Re York Condominium Corp. No. 528 and Ontario New Home Warranty Program (1987), 1987 4073 (ON SC), 60 O.R. (2d) 662, the Divisional Court stated (at para. 27) as follows:

The condominium corporation for the purposes of this appeal, and in accordance with the relevant statutes, are [sic] deemed to be the owners of the common elements, although in actual fact the unit owners own the common elements as tenants in common.

[12] The foregoing statement reflects a reading of both s. 11(2) of the Condominium Act, 1998, S.O. 1998, c.19, together with ss. 13, 14 and 15 of the ONHWP Act. In relation to ownership for real property purposes, s. 11(2) of the Condominium Act provides that “the owners are tenants in common of the common elements and an undivided interest in the common elements is appurtenant to each owner’s unit.” In relation to new home warranty rights and obligations, however, s. 15 of the ONHWP Act provides that, for purposes of ss. 13 and 14 of that statute, “a condominium corporation shall be deemed to be the owner of the common elements of the corporation.” In other words, despite the contents of s. 11(2) of Condominium Act, for purposes of the warranty coverage and compensation provisions of the ONHWP Act, the condominium corporation is deemed to be the owner of the common elements.

[13] The Condominium Act and the ONHWP Act are consumer protection legislation. The ONHWP Act exists to ensure that builders will be responsible for defects and deficiencies in homes they build, and consumers will have meaningful and efficient access to a method of addressing and remediating such defects. In the case of the common elements of a condominium project, in lieu of forcing individual unit owners to somehow pursue warranty claims separately or by way of a class proceeding, it is logical that the condominium corporation – which otherwise acts on behalf of the unit owners in managing the development and its common elements - should have a ready mechanism available for it to remedy deficiencies under the ONHWP Act, on their behalf. Giving the words of the statutes a fair and liberal meaning to ensure the attainment of the objects of the acts, in my view, a condominium corporation is entitled to enforce the warranties provided under s. 13 in relation to the common elements.

[14] In light of the foregoing analysis, in relation to the specific arguments advanced by the defendants, I accept and adopt as accurate the submissions of the plaintiff contained in the following paragraphs of its factum: in response to the defendants’ argument summarized in paragraph 52 of the plaintiff’s factum, I accept the submissions summarized in paragraphs 53, 54, 55, 56, 57 and 58; in response to the defendants’ argument summarized in paragraph 59, I accept the submissions summarized in paragraphs 60, 61, 62, 63 and 64; in response to the defendants’ argument summarized in paragraph 65, I accept the submissions summarized in paragraphs 66 and 67; in response to the defendants’ argument summarized in paragraph 68, I accept the submissions made in paragraph 69.

[15] Although I reject the arguments of the defendants concerning the scope of the warranty provisions contained in the ONHWP Act and, in particular, the submission that the condominium corporation is not entitled to the benefit of the warranties or the right to enforce them, there is an alternative basis upon which the plaintiff is entitled to succeed. In essence, the defendants argue that the warranty rights inure not to the condominium corporation, but to the individual unit owners and only they are entitled to enforce such rights. In reality, pursuant to s. 13 of R.R.O. 1990, Regulation 892 under the ONHWP Act, Tarion is subrogated to all rights of recovery of a person to whom payment in respect of a claim has been made out of the Guarantee Fund under the ONHWP Act. The regulation goes on to provide that Tarion is entitled to maintain an action in its own name against any other person against whom the action lies in respect of such rights of recovery. Here, Tarion paid OCC 737 on behalf of the unit owners in order to fund the repairs to the common elements. As such, under s. 13 of the Regulation, Tarion is entitled to maintain a subrogated claim in its own name in respect of such payments. Accordingly, this is another basis upon which Tarion is entitled to succeed in relation to the subject of liability.

[16] Finally, the defendants submit that Tarion did not comply with the ONHWP Act, because it did not follow a regulatory or judicial procedure to process the common elements claim made by OCC 737. At the time these claims were processed, there was no formal regulation that governed the claims process. That said, on the evidence presented in this case, proper notice was provided to Domaines about the warranty claims, but it did not respond. Tarion cannot, therefore, be faulted for any alleged failure to provide Domaines with an opportunity to participate and object to the amounts paid in relation to the claims. Moreover, given that there was no statutory or regulatory procedure in place at the time, I do not accept the submission of the defendants that Tarion lacked jurisdiction to proceed as it did. This is not a case, unlike Kupeyan v. Royal College of Dental Surgeons of Ontario (1982), 1982 1966 (ON SC), 37 O.R. (2d) 737 (Div. Ct.) in which the “formalities required by the Act [were] not … complied with ….”

[17] In any event, given the parameters governing this motion to which the parties have agreed, it remains open to the defendants to dispute the quantification of the various claims processed by Tarion that were the subject of the invoices to Domaines and the drawdown on the letter of credit. This means that, despite the lack of participation by Domaines in the previous process, it remains open to Mr. Latreille to challenge the quantification of – but not his personal liability for – the warranty claims paid by Tarion.

[18] For these reasons, the defendants’ motion for summary judgment is dismissed. A declaration will issue that Mr. Latreille, as indemnifier for Domaines, is personally liable to make good to Tarion any deficiency in respect of the warranty claims processed by Tarion for the common elements at OCC 737, once those sums are agreed upon or quantified by further court process.

[19] As agreed upon by the parties, as the successful party, the plaintiff is entitled to costs in the all-inclusive sum of $20,000 for the summary judgment motion. That sum is due and payable within 30 days.

[20] The defendants’ motion for summary judgment is dismissed in accordance with the determination made in this endorsement of the legal issue presented.

[21] Finally, on consent of the parties, I make an order pursuant to rule 13.1.02(2) transferring this proceeding and all future steps in it to Ottawa. Despite the fact that I have heard and decided a motion for summary judgment, since the action will henceforth proceed as an Ottawa action, this is not a case where it is appropriate for me to become seized: see Hryniak v. Mauldin, 2014 SCC 7. I consider the transfer of this proceeding to Ottawa to be a “compelling reason to the contrary” for my not seizing myself of the matter as the trial judge.

Stinson J.

Date: June 13, 2014