Tarion Warranty Corporation v. 1518162 Ontario Inc. and Mark N. Turner

COURT FILE NO.: CV-11-433822

DATE: 20151027

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

TARION WARRANTY CORPORATION Plaintiff

– and –

1518162 ONTARIO INC. and MARK N. TURNER Defendants

Counsel: Neil Abbott, for the Plaintiff Mark Turner, In Person for the Defendants

HEARD: January 5 & 6, 2015

REASONS FOR JUDGMENT

firestone j.

[1] The plaintiff, Tarion Warranty Corporation (“Tarion”), is a non-profit corporation designated by the Lieutenant Governor in Counsel under section 2 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “Act”). Under the Act it can bring an action in its own name against any party that a purchaser of a new home would otherwise have been entitled to sue.

[2] Under the Act, a guarantee fund is established in respect of warranty claims made by new homeowners for deficiencies in construction. Tarion claims against 1518162 Ontario Inc (“151”) and Mark Turner (“Turner”) for recovery of the amounts it paid out of the guarantee fund to owners of a home located at 91 Fish and Game Club Road in Foxboro, Ontario.

[3] By way of an agreed statement of facts entered as an exhibit at trial, the parties agree that the total principal sum paid out of the guarantee fund by Tarion and invoiced to 151 is $64,411.55. Tarion further claims statutory prejudgment interest calculated at 18% per annum.

[4] By way of counterclaim, 151 and Turner assert that Tarion was negligent. They claim that Tarion contributed to the circumstances occasioning its loss and that it should bear all expenses attached to its claim. They seek an award of damages in the amount of $100,000.00, punitive damages in the amount of $100,000.00, post-judgment interest and costs.

[5] In an amended statement of defence and counterclaim, 151 and Turner named a number of additional defendants. On consent, the claims against each of these additional defendants were dismissed prior to trial.

[6] On the first day of trial and on the consent of Tarion, Turner was granted leave to represent 151. On the second day of trial the parties requested permission to deliver their closing arguments in writing. Those written submissions were subsequently received.

The Legislative Scheme

[7] The Ontario New Home Warranties Plan imposes mandatory warranties on new home builders and vendors in Ontario. This warranty scheme is intended to regulate the new home industry in Ontario and provide consumer protection.

[8] The scheme governs compensation payments to purchasers of new homes where builders and vendors do not honour their mandatory warranties. Under s. 13 of the Act, every vendor of a new home warrants to the purchaser 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, O Reg. 332/12. Section 6 of the Act creates an offence where a person acts as a vendor or builder of a new home without registering under the Act.

[9] Where a purchaser of a home has a claim against a builder or vendor for breach of warranty, Tarion may pay the purchaser’s damages, pursuant to the Regulation titled “Administration of the Plan,” R.R.O. 1990, Regulation 892 (the Regulation). If Tarion makes such a payment, it is entitled to recover the amount of the payment from the builder/vendor by way of a subrogated claim.

Factual Background

[10] The following facts are agreed to between the parties. [^1]

− The plaintiff, Tarion Warranty Corporation (Tarion), is the corporation designated by the Lieutenant Governor in Council, pursuant to section 2 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O. 31 (the Act) to administer the Ontario New Home Warranties Plan.

− At all material times Tarion maintained a website, www.tarion.com which contains educational information detailing the rights and obligations of Homeowners, Vendors and Builders under the Act.

− The defendant, Turner is an individual residing at 15 Greene Street, Belleville, Ontario, K8P 1R6.

− At all material times Turner was the sole officer, director and controlling mind of the defendant, 151 which is incorporated under the laws of the Province of Ontario.

− Neither 151 nor Turner ever registered as a Vendor or Builder under the Act.

− In 2007, 151 purchased a home located at 91 Fish and Game Club Road, R.R. #1, Foxboro, City of Quinte West, Ontario (the Home) by way of power of sale.

− When 151 purchased the Home, it was not occupied and not finished. After purchasing it, 151 performed additional work on the Home with the intention of finishing and selling it.

− Neither 151 nor Turner ever enrolled the Home under the Act.

− On May 24, 2008, 151 entered into an Agreement of Purchase and Sale with David Gerald Gendron and Tanya Krista Rawluck (the Owners) with respect to the Home.

− On July 21, 2008, 151 obtained an occupancy permit for the Home.

− On July 31, 2008, the purchase and sale transaction closed.

− Prior to closing, the Home had never been occupied within the meaning of the Act.

− On March 2, 2009, Tarion sent a letter to the Owners confirming that they had requested a conciliation inspection of defects in their Home. The letter was copied to 151 and advised that it had until April 1, 2009 to rectify all warrantable defects identified in the construction of the Home.

− On May 20, 2009, Tarion sent a letter to 151, enclosing a Warranty Inspection Report. The report identified warrantable defects in the construction of the Home. Tarion gave a deadline for the defects to be remedied by June 19, 2009. Tarion advised that, if the defects were not remedied by this time, Tarion would settle the Owners’ warranty claim by making a payment out of the guarantee fund and invoice 151 for all related costs.

− On June 23, 2009, Tarion sent a letter to the Owners, copying 151, advising that the warrantable defects identified in the Warranty Assessment Report remained outstanding.

− On October 7, 2009, Tarion sent a letter to 151 advising that, because 151 had not rectified the warrantable defects identified in the Warranty Assessment Report, it was in breach of its warranty. Tarion further advised that 151 would be invoiced for any payments made by Tarion to settle the Owners’ claim, pursuant to section 14 of the Act.

− On October 13, 2009, Turner sent a letter to Tarion on behalf of himself and 151. Turner and 151 took the position that, because neither Turner nor 151 considered themselves builders under the Act, they were not prepared to rectify the defects identified in the Warranty Assessment Report.

− On November 11, 2009, Tarion sent an invoice to 151 seeking reimbursement of $29,417.86 for expenses incurred by Tarion to settle the Owners’ claim. This invoice was not paid.

− On February 9, 2010, Tarion sent a letter to 151 enclosing a second Warranty Inspection Report. The report identified additional warrantable defects in the construction of the Home. Tarion gave a deadline for the defects to be remedied by March 11, 2010. Tarion advised that, if the defects were not remedied by this time, Tarion would settle the Owners’ warranty claim by making a payment out of the guarantee fund and invoice 151 for all related costs.

− On February 9, 2010, Tarion sent 151 an invoice seeking payment of a $1,050 chargeable conciliation fee. This invoice was not paid.

− On March 12, 2010, Tarion sent a letter to the Owners, copying 151 advising that the warrantable defects identified in the Warranty Assessment Report remained outstanding.

− On April 26, 2010, Tarion sent a letter to 151 advising that, because 151 had not rectified the warrantable defects identified in the second Warranty Assessment Report, it was in breach of its warranty. Tarion further advised that 151 would be invoiced for any payments made by Tarion to settle the Owners’ claim, pursuant to section 14 of the Act.

− On May 19, 2010, Tarion sent an invoice to 151 seeking reimbursement of $33,943.69 for expenses incurred by Tarion to settle the Owners’ claim. This invoice was not paid.

− The total principal sum paid out of the guarantee fund by Tarion and invoiced to 151 is $64,411.55. Tarion also claims statutory pre-judgment interest calculated at a rate of 18% per annum, pursuant to section 4.2 of Regulation 894.

Position of the Parties

Tarion

(a) The Liability of 151

(1) Is the numbered company subject to the statutory warranty in s. 13 of the Act?

[11] Tarion submits that vendors of new homes are deemed to provide a statutory warranty to the purchasers of those homes, which neither the vendor nor the purchaser can waive or contract out of. Tarion points to s. 1 of the Act, which defines a “vendor” as “a person who sells on his, her or its own behalf a home not previously occupied to an owner and includes a builder who constructs a home under contract with the owner.” Tarion highlights that, per the Agreed Statement of Facts at para. 12, 151 and Turner agree that the home had never been occupied within the meaning of the Act. Therefore, in Tarion’s view, the defendant numbered company was subject to the warranties under s. 13.

(2) Is it an abuse of process for the numbered company to re-litigate its status as a vendor under the Act?

[12] Tarion further submits that it is inappropriate for the corporate defendant to seek to re-litigate its status as a vendor under the Act. Tarion argues that this issue was settled in a prior criminal proceeding: Her Majesty the Queen v. 1518162 Ontario Inc. (16 August 2010), Belleville 08-0419, 08-0420 at 2 (Prov. Ct.). On August 16, 2010, 151 was convicted under s. 22(1) of the Act of acting as a vendor of a home without having registered pursuant to s. 6. Turner was convicted of knowingly concurring in the numbered company’s breach.

[13] To arrive at its conclusion that the failure of 151 to register occasioned a breach of the Act, the court had to find that it sold on its own behalf a home that was not previously occupied when it was sold, and that the numbered company was therefore a “vendor” under the Act.

[14] Tarion raises the concern, articulated in Toronto (City) v. Canadian Union of Public Employees (CUPE) Local 79, 2003 SCC 63 at para. 52, that re-litigation of facts decided in a prior proceeding can constitute an abuse of process. This is particularly the case where the prior proceeding was a criminal one. The exacting burden of proof in criminal proceedings warrants greater deference to factual findings made therein. Rather than pursuing the proper avenue for challenging a criminal conviction, an appeal of the conviction itself, 151 and Turner attempt in this action to revisit the issue of the numbered company’s status as a vendor. In this case, Tarion argues, an abuse of process is made out.

(3) Does the numbered company’s failure to register under the Act affect its status as a vendor?

[15] A critical position taken by Tarion is that the numbered company’s failure to register under s. 6 of the Act does not affect its status as a “vendor” under s. 1, and does not affect its liability under the warranty provision (s. 13). The statute’s plain meaning is that any individual may be a vendor under s. 1 without being registered pursuant to s. 6. Section 1 of the Act makes no reference to registration.

[16] Tarion contends that s. 6, which states “[n]o person shall act as a vendor or builder unless the person is registered by the Registrar under this Act,” would have no meaning, and would be impossible to violate, if all vendors were, by definition, registered under the Act.

[17] Tarion also argues that the legislature has made it clear that the statutory warranty provision applies to all vendors, regardless of whether they have registered. This is evidenced by the fact that ss. 8 and 9 of the Act use the term “registrant” to refer to builders and vendors who are registered pursuant to s. 6.

[18] The legislature, it submits, chose to use the term “vendor” in s. 6 rather than “registrant” where it could easily have done so. Tarion cites Mandos v. Ontario New Home Warranty Program, 1995 CanLII 3158 (ON CA), [1995] O.J. No. 3647 for the proposition that the Act should be given a fair and liberal interpretation. The legislation’s remedial purpose, affirmed by the Ontario Court of Appeal in Mandos v. Ontario New Home Warranty Program, [1995] O.J. No. 3647 at para. 1 (C.A.), dictates that the numbered company should still be considered a “vendor” and should be held to its warranty obligations, even though it did not register pursuant to s. 6. Tarion submits that allowing 151 and Turner to escape their warranty obligations by not registering would be to reward them for their illegal acts. It would not be consistent with the remedial and protective purpose of the legislation

(4) Is 151 liable for the amounts Tarion paid out of the guarantee fund with respect to warranted defects in the Foxboro, Ontario home?

[19] Regarding liability on the part of 151 for amounts paid out from the guarantee fund by Tarion to the homeowners, Tarion submits that the company is liable for $64,411.55 in claims for warranted defects in the home, and for Tarion’s legal costs. Tarion submits that under sections 13(1) and (2) of R.R.O. 1990, Regulation 892, it 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 and may conduct legal proceedings including an action for damages to recover the amount paid out.

(b) The Liability of Turner

(1) Is Turner personally liable for the damages claimed by Tarion?

[20] Tarion submits that Turner is personally liable for his corporation’s breach as its officer, director and guiding mind. It submits that it is necessary to lift the corporate veil and hold Turner personally liable because he knowingly concurred in his company’s violation of the Act. Key to Tarion’s argument is its submission that a director of a corporation will face personal liability if the corporation is dominated and controlled by that director, and is being used by that director as a shield for fraudulent and improper conduct: 642947 Ontario Limited v. Fleischer et al., (2001) 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 at para. 68.

[21] Tarion submits that a court will more readily pierce the corporate veil in the case of fraud or improper conduct when doing so will prevent an innocent third party from suffering damages as a result of the wrongdoer shielding himself with incorporation: Kosmopoulos v. Constitution Insurance Co of Canada, 1987 CanLII 75 (SCC), [1987] 1 S.C.R. 2 at para. 13.

[22] Tarion argues that it is an innocent third party that was harmed by the failure of 151 to register under the Act. The harm it suffered consisted of being deprived of the opportunity to obtain a personal guarantee from Turner, which would have been required if 151 had sought registration under the Act.

[23] For Tarion, the personal guarantee is an important part of the registration process. It recognizes the reality that in the building industry, individuals frequently set up corporations with few or no assets in order to shield themselves from liability in the event of poor construction.

[24] As a result of 151 and Turner’s conduct, Tarion argues that it was left with no personal guarantee to protect it against possible damages arising from the warranty obligations owed to the homeowners under the Act. Tarion submits that the public protection purpose of the Act cannot be affected without the personal guarantee mechanism.

[25] 151 also avoided Tarion’s screening process by failing to register under the Act. The screening process verifies a vendor’s financial responsibility, integrity and technical competence. The Court of Appeal has recognized that this process is essential to protecting the public against financially irresponsible, unethical and/or technically incompetent home builders: Ontario New Home Warranty Program v. Lukenda, (1990) 1991 CanLII 7167 (ON CA), 2 O.R. (3d) 675.

(c) The Liability of Tarion

(1) Is Tarion liable to the defendant for failing to warn?

[26] Tarion’s submissions on this issue are central to its defence against the counterclaim in negligence. The essence of the counterclaim is that Tarion had a duty to warn 151 and Turner of the need to register the numbered company as a vendor before selling the home. 151 and Turners’ position is that they had a corresponding right to be warned.

[27] Tarion submits that 151 and Turner cannot rely on their ignorance of the law as an excuse. The Supreme Court of Canada upheld this principle in R. v. Jorgensen, 1995 CanLII 85 (SCC), [1995] 4 S.C.R. 55 at para. 25. Tarion submits that the contributory role on the part of 151 and Turner in precipitating their own breach of the Act is overriding.

[28] Tarion argues that 151 and Turner displayed a pattern of wilful ignorance of and disregard for the law, and that this pattern continued even after they were charged under s. 22(1) of the Act. 151 and Turner refused to participate in the conciliation process and refused to pay the fines ordered against them.

[29] Tarion argues that while it makes extensive efforts to educate the public about the Act, it does not have a statutory duty, policy or past practice of ensuring that its investigators warn prospective vendors about their legal obligations. Tarion submits that there is no evidence that it, or its agents, acted with any malice giving rise to civil liability. 151 and Turner, it argues, are the sole authors of their misfortune.

(d) Turner’s Defences

(1) Are 151 and Turner protected by the defences of officially induced error?

[30] Tarion’s arguments respond to defences on which the defendant does not explicitly rely, but which the defendant’s arguments raise as possibilities. Officially induced error is one such defence.

[31] Tarion submits that the defence of officially induced error is generally applied to criminal or regulatory offences, and that it has no application in the civil context. In order to make out this defence, as confirmed in Lévis (City) v. Tétreault; Lévis (City) v 2629-4470 Québec Inc., 2006 SCC 12 at para. 26, the following six elements must be proven:

(1) that an error of law or mixed law and fact was made;

(2) that the person who committed the act considered the legal consequences of his or her actions;

(3) that the advice obtained came from an appropriate official;

(4) that the advice was reasonable;

(5) that the advice was erroneous; and

(6) that the person relied on the advice in committing the act.

Tarion submits that of these six elements of this offence, 151 and Turner are unable to make out (2) to (6). The only factor that is satisfied is that 151 and Turner made an error of law or mixed law and fact. 151 and Turner did not seek legal advice prior to selling the home. They had no advice to rely upon.

(2) Are 151 and Turner protected by the defence of estoppel by representation?

[32] The second defence to which Tarion replies is estoppel by representation. Tarion submits that, as 151 and Turner did not communicate with Tarion prior to breaching the Act, Tarion could not have made any representations for 151 and Turner to rely on. Tarion further submits that if it had made representations, they would have been representations of law, to which the doctrine of estoppel by representation does not apply.

(3) Are 151 and Turner protected by the defence of entrapment?

[33] The third and final defence Tarion counters is entrapment. Tarion submits that entrapment is a criminal defence, and as such, it should not be applied to the civil context. Tarion cites the Supreme Court decision in R. v. Mack, 1988 CanLII 24 (SCC), [1988] 2 S.C.R. 903 at para. 126. The test for entrapment, Turner submits, sets a high threshold. It is only met where police and their agents engage in conduct which offends basic values in the community.

[34] Tarion submits that it did not provide 151 and Turner with an opportunity to breach the Act. 151 and Turner, it argues, made that opportunity for themselves by selling a home without registering. Tarion takes the position that it did nothing to induce 151 and Turner to breach the Act.

151 and Turner

(a) The Liability of 151

[35] 151 and Turner take the position that the continuing breach of the Act could have been avoided if Tarion had intervened to advise 151 and Turner of the requirement to register as soon as it possessed the information that the home in Foxboro had been sold. The breach could have been avoided entirely if Tarion and its agent, Leonard Dean (Dean), had proactively reached out to Turner when Dean suspected that the sale of the home was imminent. Dean’s investigation of the property, which extended for ten months, afforded him knowledge of the lack of registration and, therefore, the potential for Tarion’s loss. 151 and Turner submit that if Tarion, with its experience in the building industry, had shared this information with them, 151 and Turner could have considered other options for the home, including registration under the Act or retention of the home for personal use.

(b) The Liability of Turner

[36] 151 and Turner take the position that Tarion should not be allowed to lift the corporate veil because Tarion’s own inaction significantly contributed to the circumstances giving rise to its claim. Tarion, 151 and Turner argue, did nothing to mitigate its exposure. It was Tarion that possessed the knowledge of the breach and of the potential for its exposure to loss because of it. 151 and Turner submit that Turner is not attempting to benefit from wrongful and illegal actions by escaping personal liability.

[37] 151 and Turner distinguish the cases relied on by Tarion in support its submission that 151 and Turner should not be rewarded for their illegal acts. Tarion refers to the case of Zambri v. Grammelhofer, [2009] O.J. No. 5043 at para. 16 for the proposition that people cannot benefit from their own improper and unlawful actions. 151 and Turner submit that this case bears no resemblance to this matter. In Zambri, the defendants had trespassed on lands, and had fraudulently altered a survey and then presented it to the township and the court in an attempt to benefit from the fraud they had perpetrated.

[38] Tarion further relies on R. v. Shearing, 2002 SCC 58, 3 S.C.R. 33, where L’Heureux-Dubé J., dissenting in part, found inadequate reasons to allow the accused to circumvent a statutory scheme through unlawful or wrongful means to benefit from his disreputable behaviour. This case, 151 and Turner submit, is entirely out of context and is inapplicable to the present proceeding. Shearing was a criminal matter in which the accused, a cult leader, had been charged with multiple sexual offences and was seeking to admit evidence he illegally obtained from one of the complainants in order to discredit her testimony. In Vandenbrink Farm Equipment Inc. v. Double-D Transport Inc., 1999 CanLii 14947, 47 B.L.R. (2d) 308, another case relied on by Tarion, the court cited from a Court of Appeal decision that held that a carrier could not benefit under a statute where it has failed to comply with its terms.

[39] 151 and Turner submit that this case is irrelevant to the present proceeding because it involved a contractual relationship between the parties. No agreement of this nature existed between Tarion and 151 and Turner. Moreover, Vandenbrink is distinguishable on the basis that it lacked the element of contribution on the part of Tarion to the resulting loss. The same can be said for the case of Corcoran v. Ehrlick Transport Ltd. et al., (1984), 1984 CanLII 2023 (ON CA), 46 O.R. (2d) 225 (C.A.), upon which Tarion further relies.

(c) The Liability of Tarion

[40] 151 and Turner claim that Tarion owed them a duty to act fairly in execution of its government-mandated responsibilities. They submit that Tarion’s agent, Dean, knew that they had breached the Act, but did nothing to notify them. They argue that as a result of the investigation Dean had undertaken of the home, he had knowledge that 151 and Turner were not registered, and yet he failed to advise them that registration was required.

[41] 151 and Turner contend that Tarion deprived itself of the opportunity to obtain a personal guarantee from 151 and Turner. They argue that Tarion deprived them of options to avoid being charged. They submit that Tarion contributed to the circumstances which resulted in this litigation. Tarion, they contend, allowed the breach to occur, and that this was reckless and negligent.

[42] 151 and Turner argue that Tarion had not only a duty to warn, but a duty to act fairly and a duty of care. Tarion’s agent, Dean, commenced an investigation in September of 2007 after being notified by a municipal building inspector, Phillip Lappan (Lappan) of an incomplete home being completed for sale. Dean visited the site six times between October of 2007 and July of 2008. Dean had several conversations with Lappan about the home. They discussed, among other things, the need for the builder/vendor to register under the Act.

[43] Before the agreement of purchase and sale of the home closed, Lappan advised the purchasers of the home that they were entitled to a warranty and that he would be reporting Turner for failing to register under the Act. 151 and Turner submit that they alone were excluded from access to information about the requirement to register. Dean gave evidence that he had, on past occasions, notified builders/vendors of the need to register under the Act.

[44] Dean attested that, during the period of his investigation of the home in this case, no offence had been committed and he felt no need to intervene. Tarion and Dean testified at trial that as soon as the parties enter into a purchase agreement, an offence has been committed under the Act.

[45] Five weeks elapsed between the parties entering into the agreement of purchase of sale and the closing date. 151 and Turner submit that the failure of Tarion to advise of the breach, or that it could be remedied through registration, was reckless. They submit that Tarion and Dean were complicit in the breach of the Act.

[46] 151 and Turner do not specifically make submissions regarding Tarion’s duty to act fairly. They do reproduce portions of three cases that deal with the duty to act fairly: Hardy v. Min. of Educ., (1985) 22 D.L.R. (4th) 394, 1985 CanLII 250 (B.C.S.C.); Bezaire v. Windsor Roman Catholic Separate School Board, (1992) 9 O.R. (3d) 737, 1992 CanLII 7675 (ON SC); and Nicolson v. Haldimand-Norfolk Regional Police Commissioners, [1979] 1 S.C.R. 311, 1978 CanLII 24 (SCC).

[47] 151 and Turner take the position that once Dean set foot on the property, he and Tarion owed 151 and Turner a duty of care. Tarion and its agent breached that duty by acting differently towards 151 and Turner than they had towards other vendors/builders on other occasions. 151 and Turner assert that Tarion, in breaching their duty of care, caused harm to 151 and Turner.

[48] They argue that Tarion is a statutorily created body, acting on the will of the legislature, serving and protecting the rights of Ontarians. As such, it has a duty of care and a duty to act fairly in all its dealings with the public. As a result it must observe and be guided by the principles of natural justice. They further argue that the Tarion’s conduct was reckless, ineffective, inconsistent, negligent, and lacking integrity in execution of its Crown mandated duties.

[49] They further submit that Tarion failed in its responsibility to exercise due diligence. They cite, with no analysis, from Tarion Warranty Corporation v. Castle Time Homes Inc., 2013 ONSC 2470, presumably for the proposition that Tarion had a responsibility of due diligence in the present case.

(d) Turner’s Defences

[50] 151 and Turner’s submissions do not set forth defences to Tarion’s claim that exist in law. Rather, their submissions focus heavily on the issue of Tarion’s liability. There is no argument made, and no case law relied upon, to advance a defence to the originating claim except to shift liability to Tarion.

Analysis

[51] Central to the determination of this matter is whether 151, who was not registered as a vendor under the Act, was still bound by its provisions, and whether Turner should be held personally liable for concurring in the numbered company’s breach.

[52] Anyone who sells a previously-unoccupied home in Ontario is captured by this statutory scheme. On July 31, 2008, the numbered company sold the home in Foxboro; the home had previously been unoccupied. [^2]

[53] 151 meets the definition of a “vendor” set out in s. 1 of the Act. Under s. 13, vendors are deemed to provide a statutory warranty to new home buyers. The warranty is mandatory; it cannot be waived or contracted out of. By their own admission, 151 and Turner sold a previously unoccupied home, and therefore, despite failing to register under the Act, 151 was subject to its warranty provisions.

[54] The fact that 151 failed to register does not, with respect, relieve it of its warranty obligations under the Act. Failure to register is not an avenue available to 151 and Turner to circumvent liability for claims paid out of the guarantee fund by Tarion, the corporation designated by the Crown to administer the New Home Warranty Plan. It would, in my respectful view, be contrary to the purpose of the legislation, which has repeatedly been affirmed as being consumer protection in the new home industry, (see Mandos at para. 1) if builders and vendors could avoid liability simply by failing to register under the Act. Liability against 151 has been established.

[55] Turner’s personal liability is also supported by the evidence. He was the director, officer and controlling mind of the numbered company at all material times. [^3] As early as May 20, 2009, when Turner received Tarion’s letter regarding the first Warranty Inspection Report, he had knowledge of the breach of warranty. [^4]

[56] That knowledge was reinforced in Tarion’s letters dated June 23 and October 7, 2009.[^5] That evidence supports Tarion’s contention that Turner knowingly concurred in breaching the Act. Turner maintains that, prior to his sale of the home he had no knowledge of the need to register or of his warranty obligations.

[57] However, when he did become aware of the breach, he could, with respect, have taken action to rectify it immediately. He did not. He concurred in its continuation by refusing to pay for the deficiencies to be corrected. [^6] Turner was found to have knowingly concurred in a breach of the Act and was convicted of an offence under s. 22(1)(b) by Justice of the Peace Stewart on August 16, 2010. [^7]

[58] Turner and 151 attempt to distinguish the cases upon which Tarion relies for its submission that Turner should not be permitted to benefit from his illegal acts. The facts of the cases cited by Tarion do differ markedly from the facts of the present matter. However, Tarion does not rely on these cases because they have factual matrices similar to that of the present case. Rather, Tarion extracts from these cases statements of an established point of law that is relevant to this proceeding. The distinctions between the authorities cited by Tarion on this point and the present proceeding do not negate their relevance to the issue of Turner’s personal liability.

[59] As a result based on the applicable legal principles to the factual matrix of this case, the corporate veil should be lifted and Turner should be found personally liable: Ontario New Home Warranty Program v. Portsmith Contracting Ltd. et al. (19 August 1997), Toronto 97-SR-117819 (Ont. Gen. Div.) at para.1; Fleischer; and Kosmopoulos. Moreover, 151 and Turner concede in their written submissions that the alleged breaches of the Act occurred. While they acknowledge that they violated the statute, they deny any legal responsibility for its consequences.

[60] 151 and Turner do not raise a defence to Tarion’s claim for breach of warranty. Rather, they focus their submissions on the wrongdoing of Tarion. Even if 151 and Turner’s counterclaim is found to merit the remedies they seek, their failure to defend against the originating claim in this litigation exposes them to a finding of civil liability.

[61] The counterclaim being advanced is based on Tarion’s alleged negligence. 151 and Turner further rely on the Tarion’s failure to meet what it submits is their duty of fairness. The duty of fairness arises in the administrative law context. 151 and Turner have failed to establish that Tarion had a duty of fairness towards them or that their failure to meet that duty negated their legal responsibilities under the Act or occasioned compensable damages.

[62] 151 and Turner assert that Tarion is an administrative body that owes a duty to the public to act fairly in all its dealings. 151 and Turner misconstrue the role and functions of Tarion. It is not itself an administrative body as conceived in the cases 151 and Turner cite. It is a non-profit corporation contracted by the Crown to administer a statutory scheme. It is designated as the administrator of the Ontario New Home Warranty Plan under s. 2(1) of the Act.

[63] There is a tribunal that is empowered under the statute to hear disputes about decisions made by Tarion. Hearings are held before the Ontario License and Appeal Tribunal, which is governed by the License Appeal Tribunal Act, 1999, S.O. 1999 c. 12 Sched. G. Tarion’s website suggests that the License Appeal Tribunal system is intended for consumers (homebuyers), while the Builder Arbitration Forum exists for builders who disagree with a Tarion decision. Arbitration under the Act is governed by the Arbitration Act, R.S.O. 1990, c. O.31, and appeals of arbitration decisions lie to the Divisional Court.

[64] Tarion did not deliver a Notice of Decision to 151 and Turner, but did correspond with them at every stage of the warranty claim process. [^8] Tarion invited 151 and Turner to participate in conciliation (arbitration), but they refused. [^9]

[65] Whether or not 151 and Turner are “persons affected” by a decision to grant compensation under s. 14(3) of the Act, entitling them to a hearing before the License Appeal Tribunal, or whether they were only entitled to dispute the decision through the conciliation process under s. 17(1), they had avenues available to them to dispute Tarion’s decision-making. They did not afford themselves of these options.

[66] In support of their counterclaim 151 and Turner assert that Tarion had a duty of care, but provide no authority for the existence of a recognized duty of care and offer no analysis of whether a novel duty of care should be recognized per Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537.

[67] 151 and Turner make no submissions and failed to provide the proper evidentiary record regarding the applicable standard of care in the circumstances, how a breach of that standard occurred; causation, and what, if any, damages resulted. There were no submissions made concerning the heads of damages they seek or the quantum of those damages.

Disposition

[68] Based on the evidentiary record before me, I find that Tarion has established liability on the part of both 151 and Turner for the amount Tarion paid out of the guarantee fund to compensate the homeowners for warrantied deficiencies in their home. Tarion shall have judgment against 151 and Turner in the amount of $64,411.55 plus statutory pre-judgment interest calculated at the rate of 18% per annum. For the reasons set forth above the counterclaim is dismissed.

[69] I encourage the parties to agree on the issue of costs. If they cannot, Tarion is to provide its costs submissions in both the main action and counterclaim by November 6, 2015. These submissions are not to exceed three pages in length. 151 and Turner are to provide their responding costs submissions of the same length in the main action and counterclaim by November 16, 2015. Any reply by Tarion submitted by November 23, 2015.

Firestone J.

Released: October 27, 2015

[^1]: Agreed Statement of Facts, Exhibit 5. [^2]: Agreed Statement of Facts, paras. 11 and 12, Exhibit 5. [^3]: Agreed Statement of Facts, para. 4. [^4]: Plaintiff’s Book of Documents, Tab 6, Exhibit 3. [^5]: Plaintiff’s Book of Documents, Tabs 7 and 12, Exhibit 3. [^6]: Agreed Statement of Facts, paras. 18, 20 and 23, Exhibit 5. [^7]: Plaintiff’s Book of Documents, Tab 32, Exhibit 3. [^8]: Plaintiff’s Book of Documents, Tabs 4, 7, 8, 12, 15, 22, 24 and 26, Exhibit 3. [^9]: Plaintiff’s Book of Documents, Tab 6, Exhibit 3.