SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: 270/13
DATE: 2014/07/29

RE: Richard Choo-Yick and Kenisha Choo-Yick (Plaintiffs)

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Tarion Warranty Corporation and Mike Hanas (Defendants)

BEFORE: Justice H. A. Rady

COUNSEL: Richard Choo-Yick and Kenisha Choo-Yick, in person

Montgomery Shillington, for the defendants

HEARD: July 25, 2014

E N D O R S E M E N T

Introduction

[1] The defendants move pursuant to Rule 21 for an order staying or dismissing the plaintiffs’ claim against Mike Hanas; striking the claim for punitive damages; and striking the claim for “twenty year open claim on our family’s health due to mould issue”. The defendants submit that no cause of action lies against Mr. Hanas who is a Tarion employee; there is no basis for the claim for punitive damages; and the claim for an “open claim” is not available in law.

[2] The plaintiffs filed no factum or book of authorities but rather delivered an affidavit setting out a detailed chronology of their dealings with their house builder and Tarion.

Preliminary Matter

[3] The motion is primarily grounded in Rule 21.01(1)(b) and (3)(d). Rule 21.01(2)(b) provides that no evidence is admissible on a motion pursuant to Rule 21.01(1)(b). There is no residual discretion to admit evidence and therefore, the affidavit is not properly before the court on this motion.

Facts

[4] The following facts are taken from the statements of claim and defence, the relevant legislation and the decision of the Licence Appeal Tribunal.

[5] Tarion is the corporation designated by the Lieutenant Governor in Council pursuant the Ontario New Home Warranties Plan Act to administer the Ontario New Home Warranties Plan.

[6] The Act serves a two-fold purpose: consumer protection and the regulation of the new home building industry. In order to protect consumers, the Act imposes limited mandatory warranties on new home builders in Ontario and provides for the payment of compensation to those purchasers whose builders have failed to honour them. The Act provides for the administration of a mandatory licensing scheme for all new home builders in Ontario.

[7] The Act also sets out an administrative procedure to be followed after a warranty claim is made to the builder and Tarion. Timelines are imposed on builders to complete the warranted repairs. If the builder and homeowner do not agree on whether a defect amounts to a warranted item, Tarion may be contacted to conciliate the dispute and conduct an inspection. If an agreement cannot be reached, Tarion is to make a warranty assessment whether the claim is covered under the warranty.

[8] If the builder is unwilling or unable to honour its warranty, after the prescribed time, Tarion provides the homeowner with compensation. Tarion has the right to arrange for the performance of repairs instead of paying compensation.

[9] If a homeowner disagrees with Tarion’s warranty findings, there is an automatic right of appeal to the Licence Appeal Tribunal, which conducts a hearing de novo. There is an automatic right of appeal of a decision made by the Tribunal to the Divisional Court.

[10] The builder’s warranty to a homeowner, as prescribed by the Act is subject to specific exclusions namely secondary damage caused by defects, such as property damage and personal injury; and damage caused by dampness or condensation due to an owner’s failure to maintain adequate ventilation.

[11] The Act and its regulations set out certain limits to Tarion’s liability to provide compensation. The total maximum amount payable to homeowners is $300,000. The maximum amount payable for damage caused by environmentally harmful substances or hazards, deleterious substances, mould or any other fungal or bacterial contamination is $15,000 per home. As a result, the plaintiffs’ claim is subject to the $15,000 limit on damages caused by mould contamination.

[12] Mr. Hanas is an employee of Tarion. Mr. Hanas was a manager of claims at the time the plaintiffs made their warranty claim. Mr. Hanas, however, transferred to a different Tarion department before Tarion issued its Decision Letter. Tarion’s field claims representatives inspected the plaintiffs’ home. They reported to Mr. Hanas until he transferred to a different department. Thereafter, the field claims representatives reported to a new manager of claims.

[13] On March 4, 2008, the plaintiffs entered into an agreement to purchase a new home located at 1920 Purcell Drive, London from Cameron Properties Inc. On July 24, 2008, the plaintiffs took possession. On July 15, 2010, the plaintiffs delivered a second-year warranty claim form to Tarion, complaining of mould growth in the basement among other things.

[14] At the plaintiffs’ request, on September 23, 2010, Tarion conducted an emergency inspection. No evidence of a window leak was found at the time. The plaintiffs advised that they were hiring a consultant to remove the basement drywall and prepare a report. Tarion’s inspection report noted that the owner could request a conciliation inspection between November 24 and December 23, 2010.

[15] Tarion was given a report by the builder’s consultant, which concluded that any mould was caused by dampness or condensation due to failure by the owner to maintain adequate ventilation. Tarion also received a report by the plaintiffs’ consultant that concluded the mould was the result of a leaking basement window. Tarion subsequently retained a consultant to evaluate the home.

[16] On January 27, 2011, the builder was deemed bankrupt pursuant to the Bankruptcy and Insolvency Act.

[17] On February 3, 2011, the consultant retained by Tarion released its report. The consultant determined that a leak in a window might be contributing to mould, but it was not a major contributor.

[18] On February 8, 2011, Tarion’s field claims representative reassessed the warranty claim in light of Tarion’s consultant’s report and found the claim to be warranted. Because the builder was unable to undertake the required remedial work, Tarion retained contractors to carry out the work recommended in its consultant’s report.

[19] The required work was completed and on March 1, 2011, Tarion was given a Statement of Condition from an expert indicating that the home was fit for habitation. The defendants have pleaded that the cost of the work at that point had already exceeded the $15,000 maximum prescribed by the Act and its regulations.

[20] The plaintiffs were not satisfied with the remedial work. They initially declined Tarion’s request that they define the items that they wished to dispute, so that a Decision Letter could be issued. On October 30, 2012, Tarion issued a Decision Letter. On November 14, 2012, the plaintiffs filed a Notice of Appeal of Tarion’s Decision Letter at the Licence Appeal Tribunal.

[21] On January 11, 2013, the Tribunal made a prehearing order that Tarion arrange to have the home tested for mould by an independent qualified entity, as soon as possible, in order to determine if the mould remediation performed to date had eliminated the mould issue in the home.

[22] On January 15, 2013, the testing referred to in the Tribunal prehearing order took place at the home. The testing was completed by Pure Balance Environmental Inc. and the results were released in a report dated January 29, 2013. The report concluded that, although there was no visible mould growth, there were significantly elevated spore trap samples in the basement of the home. The report recommended that certain cleaning and remedial work be done to remedy the problem.

[23] Tarion offered to retain a contractor to undertake the cleaning and remedial work recommended in the Pure Balance Environmental Inc. report. Ultimately, on March 28, 201, Tarion issued a Supplementary Decision Letter, which indicated that, based on the findings of the Pure Balance Environmental Inc., Tarion was prepared to:

a. conduct destructive testing on the two exterior walls of the basement bedroom to determine whether there was any active mould growth behind the walls causing the spores in the air. If active mould growth was found behind the walls, it would be remediated. The room would be reinstated to its original condition; and

b. after the destructive testing was conducted, it would undertake the recommendations outlined in the Pure Balance Environmental Inc. report. These recommendations would be performed, even if no active mould growth was found as a result of the destructive testing.

[24] The plaintiffs’ appeal to the Tribunal was heard by Tribunal Member Keith Penner over three days, commencing on April 10, 2013. The Tribunal considered the appropriateness of Tarion’s Decision Letter and Supplementary Decision Letter. It heard evidence from the plaintiffs and from representatives of Tarion, including Mr. Hanas.

[25] The plaintiffs’ appeal to the Tribunal involved essentially the same issues raised by the plaintiffs’ statement of claim.

[26] On April 29, 2013, the Tribunal’s written reasons were released. The Tribunal reaffirmed Tarion’s position in its Decision Letter and Supplementary Decision Letter. Tarion was directed to proceed as proposed in the Supplementary Decision Letter.

Analysis

[27] The test on a Rule 21.01(1)(b) motion is whether it is plain and obvious that the claim discloses no reasonable cause of action. The facts as pleaded are assumed to be true and the pleading must be read generously in order to overcome any drafting defects. For the reasons that follow, I have concluded that it is plain and obvious that there is no claim against Mr. Hanas, for punitive damages or for an “open file”.

[28] First, it is clear that at all material times Mr. Hanas was acting in his capacity as a Tarion employee. Findings of liability against employees in their personal capacities are rare in the absence of findings of fraud, deceit or dishonesty none of which are pleaded by the plaintiffs. In Montreal Trust Co. of Canada v. Scotia McLeod Inc. (1995), 1995 1301 (ON CA), 26 O.R. (3d) 481 at 9 (C.A.), leave to appeal refused, [1996] S.C.C.A. No. 40, the court made the following comments:

The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part of the employees or officers, they are also rare… In every case, however, the facts giving rise to personal liability were specifically pleaded. Absent allegations which fit within the categories described above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or which exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.”

[29] In Piedra v. Copper Mesa Mining Corporation, 2011 ONCA 191, the court explained that claims against individuals in their personal capacities “must withstand a high degree of scrutiny” and that courts must be “scrupulous in weeding out claims that are improperly pleaded or where the evidence does not justify an allegation of a personal tort”. See also Baradaran v. Tarion Warranty Corporation et al, 2014 ONCA 123, the facts of which bear a similarity to this case. In Baradaran, the Court of Appeal upheld a motions judge’s decision to strike a claim made against a Tarion employee.

[30] I see no basis on which the claim for punitive damages can be sustained. The statement of claim reveals no allegations of conduct that would justify such an award. The pleading does not articulate or particularize any high-handed, callous, malicious or vindictive conduct or a breach of any duty of good faith. The claim as pleaded is simply an expression of the plaintiffs’ dissatisfaction with the defendants’ conclusions and the remedy Tarion considered was appropriate. The plaintiffs’ appeal was dismissed and as far as I am aware, no appeal of the Tribunal’s decision was taken.

[31] While negligent conduct can attract punitive damages, such cases are rare and exceptional and when the conduct in question was deliberate, intentional and extreme: McIntyre v. Grigg, 2006 37326 (Ont.C.A.). That is not this case.

[32] Finally, the request for an “open claim” cannot succeed in the face of the Act which expressly excludes liability for secondary damages, including personal injury.

[33] As a result, the claim against Mr. Hanas is struck as are the claims for punitive damages and for an “open claim” without leave to amend.

[34] I will receive brief written submissions on costs from the defendants by August 15, 2014 and the plaintiffs by September 12, 2014.

“Justice H. A. Rady”

Justice H. A. Rady

Date: July 29, 2014