Court File and Parties

COURT FILE NO.: CV-18-595959 DATE: March 30, 2020

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Caruk-Hall Construction Inc. v. Andrew David Maciel and Jessica Kalynn Maciel;

BEFORE: MASTER C. WIEBE

COUNSEL: Jonathan Frustaglio and Rob Moubarak for Caruk-Hall Construction Inc.; Jeffrey Kriwetz for Andrew David Maciel and Jessica Kalynn Maciel;

HEARD: March 9, 2020.

REASONS FOR DECISION

INTRODUCTION

[1] The plaintiff, Caruk-Hall Construction Inc. (“CH”), brings this motion for an order staying this action and counterclaim pending the determination by the Ontario Court of Justice (“OCJ”) in the regulatory proceeding commenced by Tarion Warranty Corporation (“Tarion”) as against CH and its principals, Daniel Hall and James Caruk, pursuant to sections 6, 12 and 22 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (“ONHWPA”). These sections require “builders” as defined by ONHWPA to register and pay a fee under that Act before building “homes,” and impose penalties if that is not done. The Tarion allegation appears to be that this registration and payment were not done by CH in this case when they should have been done.

[2] In the alternative, CH moves for an order either staying or striking certain paragraphs of the defendants Amended Statement of Defence and Counterclaim alleging damages on account of the alleged failure of CH to enroll the subject project under the warranty plan of ONHWPA. The defendants oppose the motion.

BACKGROUND

[3] The following facts are not in dispute. On April 8, 2016 CH entered into a written agreement with the Maciels whereby CH was to demolish an existing house on certain property owned by the Maciels (“the Property”) and build a new house in its place. Work commenced. On August 10, 2017 there was an amending agreement. Work continued until early 2018.

[4] CH claims that it finished the contract scope and was not paid in full. The Maciels claim that CH did not finish and that it is responsible for numerous deficiencies, with one of the largest ones being an alleged issue with the footings.

[5] On April 6, 2018 CH registered a claim for lien in the amount of $277,146.65 on the title to the Property. On April 17, 2018 CH commenced this action purporting to perfect its lien.

[6] On April 4, 2018 the Maciels contacted Tarion asking that it commence an investigation into whether CH should have enrolled the project under the Tarion warranty plan. They contacted Tarion regularly thereafter to determine the status of the Tarion investigation.

[7] On May 15, 2018 the Maciels delivered their Statement of Defence and Counterclaim. The Counterclaim included a claim of $250,000 in damages for alleged breach of contract due to uncompleted work and deficiencies. The Counterclaim also included a claim for unspecified damages on account of an alleged failure by CH to enroll the project in the ONHWPA warranty plan.

[8] CH obtained a judgment of reference, and this action came before me for a first trial management conference on May 24, 2019. I was advised that the CH lien was now reduced to $135,718.51. The Maciels advised that they intended to amend their pleading to increase their damage claim. I made other orders for interlocutory steps including a Scott Schedule and examinations for discovery.

[9] On June 18, 2019 Andrew Maciel provided Tarion with oral testimony concerning the issue of whether CH should have enrolled the project under the Tarion warranties. The Maciels provided Tarion with the pleadings in this action other than their amended pleading referred to below.

[10] On July 30, 2019 the Maciels amended their pleading to increase their Counterclaim for damages to $1,006,150.81. They also added several paragraphs to the Counterclaim that concerned the allegation that CH had failed to enroll the project in the ONHWPA program. They added claims for a mandatory order that CH so enroll the project, or, in the alternative, if such a mandatory order was not given or could not be enforced, declarations that CH pay for future claims that would have been covered by the Tarion warranties plus orders for up-front warranty deposits.

[11] In August, 2019 Tarion had the OCJ issue three summons, one to CH and the other two to its two principals, Daniel Hall and James Caruk. The summons required that these individuals appear in the OCJ court on November 8, 2019. The summons to CH required that it answer the charge that it had acted as a “builder” under the ONHWPA concerning the Maciel project without being registered with Tarion. The summons to Messrs. Hall and Caruk required that they answer the charge that they knowingly concurred in CH failing to register the project.

[12] At Mr. Moubarak’s request, I convened a telephone conference call on October 25, 2019. In this conference call, Mr. Moubarak advised that his clients were concerned about self-incrimination at the ordered discoveries due to the Tarion proceeding. He wanted a deferral of my discovery deadline to allow his clients to find out more about the Tarion process. I granted the deferral.

[13] On November 8, 2019 Mr. Moubarak attended at the OCJ court and received Tarion’s disclosure package. Under the title, “synopsis,” Tarion stated that, as a result of its investigation, it had determined that CH had acted as a “builder” of a “new home” in relation to the Maciel project and that CH had failed to enroll the said project under ONHWPA. Hence it was bringing the charges.

[14] On February 7, 2020 CH brought this motion. In support of the motion, CH delivered the affidavit of Mr. Hall wherein he stated in paragraph 10 that, “at the outset of entering into any contract, CH explicitly advises its clients that, as they are not a builder under the ONHWPA, CH extends its own internal, and more fulsome, warranty package to clients.” It appears from this that CH’s defence to the Tarion charges will be that CH was not acting as a “builder.” The discoveries I had ordered did not take place.

MOTION FOR A STAY

[15] CH counsel argued that there should be a stay of this action pending the determination of the Tarion proceeding for the following reasons: a) there is a substantial overlap of issues between the Tarion proceeding and this action introducing the risk of inconsistent findings of fact; b) the two proceedings share the same factual background; c) the stay would prevent unnecessary and costly duplication of judicial and legal resources; d) the stay would not prejudice the Maciels but would protect the CH principals from the prejudice of self-incrimination in the Tarion proceeding and double recovery for the Maciels in this action.

[16] The court’s jurisdiction to grant stays stems from section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”). This a broad jurisdiction that allows a court to grant a stay on terms “as are considered just.”

[17] The above submission of CH counsel reflects the relevant factors to be considered by the court on a motion for a temporary stay of a proceeding pending the resolution of another proceeding. These factors were articulated by Justice Stinson in Kuchar v. Midland (Town), 2016 ONSC 6777 at paragraph 20.

[18] In addition, Justice Pitt in White v. Bay-Shep Restaurant & Tavern Ltd., 1995 CarswellOnt 1219 (Ont. Gen. Div.) at paragraph 10 stated the following: “The court must balance the potential prejudice to both parties. A stay is appropriate where the prejudice to the defendant seeking the stay outweighs the prejudice to the plaintiff from the delay in proceeding with the civil action.”

[19] Justice Stinson in Kuchar in paragraph 21 added the following: “Court will also be reluctant to grant a stay if the result of the stay is to deny the plaintiff [the responding party] access to the courts or substantially delay or impair the plaintiff’s right to have his or her case heard: Campeau v. Olympia & York Developments Ltd., [1992] O.J. No. 1946 (Ont. Gen. Div.).”

[20] Mr. Kriwetz provided me with other cautionary authority. In Falloncrest Financial Corp. v. Ontario, 1995 CarswellOnt 910 (Ont. C. A) at paragraph Court of Appeal made it clear that the test for a stay order is high, namely the moving party must prove “extraordinary and exceptional circumstances.” The Court added that the mere fact of a parallel criminal proceeding at the same time as a civil proceeding is not enough to grant a stay. This decision was approved of by the Supreme Court of Canada in Schreiber v. Canada (Attorney General), 2001 SCC 39 at paragraph 11. In the same paragraph, the Supreme Court pointed out that in Falloncrest the only stay that was allowed to stand was the one where the criminal and civil proceedings were completely reciprocal, and where the civil proceeding was commenced with an ulterior motive, namely to interfere with the criminal proceeding.

[21] I will consider these factors and arguments in making my decision.

Overlap of issues

[22] I am satisfied that there is a substantial overlap of issues between the Tarion OCJ proceeding and this action, but only as this action pertains to the allegation that CH was a “builder” and should have, but did not, enroll the Maciel project under the Tarion warranty program. These issues were pleaded by the Maciels in paragraphs 28(b) to (h) and paragraphs 32 to 35 of their Amended Statement of Defence and Counterclaim, which I will hereafter refer to as the “Overlapping Paragraphs.” The Tarion summons concern exactly the same issue that was described in the Overlapping Paragraphs. As is indicated in the Hall affidavit, the issue of whether CH was a “builder” under the ONHWPA will be the central issue in the OJC proceeding. As a result, there is a significant risk that the OCJ and this court could reach inconsistent findings of fact as to whether CH was a “builder” and whether the subject project should have been enrolled but was not.

[23] CH counsel, however, went further and argued that this entire action overlaps the entire Tarion process thereby justifying a stay of this entire action. This argument was more nuanced. The argument appears to be that if Tarion warranty coverage is given to the Maciels, there is an entire process mandated by the ONHWPA whereby the statutory warranties will be applied, a process that includes potential payment to the Maciels from a guarantee fund should the warranties be found to respond to the alleged deficiencies, and an appeal process should the warranties be found not to respond to the alleged deficiencies. CH counsel argued that the core of the Maciels’ defence and counterclaim concerns alleged deficiencies in CH’s work, and that, as a result, this court will be making the same determination as to the liability of CH for the correction of these deficiencies that Tarion will be making in assessing the application of its warranties. Therefore, so the argument went, there is a broad risk of inconsistent findings of fact.

[24] I do not accept this argument. First, the issues here are not necessarily the same. The Tarion warranties are statutory warranties. The Maciels’ allegations of deficiencies are based on the alleged requirements of the contract. These may not overlap at all. Generally the Tarion warranties concern baseline standards of construction, whereas the Maciel/CH contract may have other and additional requirements. Second, the motion material does not disclose the actual deficiencies that the Maciels complain of. Without that evidence it is difficult to determine whether the deficiencies the Maciels complain of in fact overlap with the issues Tarion will review. Third, and most importantly, the Maciel Amended Statement of Defence and Counterclaim contains issues other than deficiencies, namely such issues as uncompleted work and overpayment. There is, therefore, no justification for a stay of the entire lien proceeding.

Same factual background

[25] I am also satisfied that the Tarion OJC proceeding and this action stem from the same factual background. The OJC summons show clearly that the charges against CH and Messrs. Hall and Caruk concern the Maciel/CH contract.

Unnecessary duplication of resources

[26] As stated earlier, it appears that the OCJ will be determining the issue of whether CH was a “builder” and should have registered the project under ONHWPA. Therefore, I find that for this court to determine the same issues is an unnecessary duplication of resources.

[27] In addition, it appears that this court would not be the appropriate forum to determine these issues. The OCJ process is mandated by section 22 of the ONHWPA. Also, based on the Tarion disclosure documents, it appears that Tarion itself will either be a party to the OCJ proceeding or a significant part of it. Tarion is the very corporation charged with administering the ONHWPA, and no doubt has much experience and knowledge concerning the issues in dispute. It should be directly involved in determining those issues. Tarion is not a party, or even a necessary party, to the proceeding in this court.

[28] I make another comment. Much of the Overlapping Paragraphs concern the alleged consequences of CH’s failure to enroll the project. The concern expressed in these paragraphs is that CH may have denied the Maciels the benefit of the Tarion warranties by not having the project registered. After reflection, I am satisfied this should not be an issue. Once the issue of CH’s status as a “builder” is determined, the question of Tarion warranty coverage should follow as a matter of course. CH counsel showed me authority for the proposition that a builder (and Tarion) cannot escape liability under the statutory warranties by the builder’s failure to register a new home project.

[29] CH counsel provided me with two decisions on point. In Tarion Warranty Corporation v. 1518162 Ontario Inc., 2015 ONSC 6500 Tarion was pursuing a contractor company and its principal for reimbursement of Tarion costs paid out under the statutory warranties. The main defence was that Tarion was not liable to pay these costs as the company had not registered under ONHWPA. Justice Firestone dismissed this argument in paragraph 54: “The fact that 151 [the builder] 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.”

[30] In Tarion Warranty Corporation v. Boros, 2011 ONCA 318 at paragraph 25 the Court of Appeal stated the following: “In effect, those who purchase new homes, that have never before been occupied, are entitled to the protections and warranties available under the ONHWPA Act whether those from whom they acquired their properties are registered or not.” Therefore, the critical issue for the Maciels is whether CH was a “builder.” The other aspects of the Overlapping Paragraphs are immaterial and a waste of resources.

[31] For the reasons stated, I find that the within action as it pertains to the Overlapping Paragraphs is both a waste of resources and an inappropriate forum given the OCJ proceeding.

Prejudice balance

[32] The final factor to be considered is whether and the extent to which the Maciels will be rendered an injustice or be prejudiced by a stay as compared to the prejudice to CH and its principals will suffer if the stay is not granted.

[33] CH counsel argued at length that Messrs. Hall and Caruk would be prejudiced by the within action on account of their obligation to give discovery evidence and trial evidence concerning the very issues that are before the OCJ. The argument is that the ONHWPA section 22(2.1)(b) charges against Messrs. Hall and Caruk in the OCJ proceeding are “penal” in nature as they specify a potential punishment of imprisonment for up to two years less a day. As a result, so the argument goes, should Messrs. Hall and Caruk fulfill their the discovery and trial evidence obligations in this action concerning the issues in the OCJ proceeding, this evidence will inevitably be used against them in the OCJ proceeding and put them in a position where their right in the OCJ proceeding under section 11(c) of the Canadian Charter of Rights and Freedoms will be infringed. This is the right of any person charged with an “offence” “not to be compelled to be witness in proceedings against that person in respect of the offence.”

[34] I find compelling the argument that ONHWPA section 22(2.1)(b) is “penal” in nature and that it, therefore, engages the Charter section 11(c). In R. v. Wigglesworth, 1987 CarswellSask 385 at paragraph 33, the Supreme Court of Canada held that the Charter section 11 pertains to proceedings that have “true penal consequences,” and that imprisonment is a primary feature of such penal consequences. In Guindon v. R., 2015 SCC 41, the same Court held in paragraph 76 that, “imprisonment is always a true penal consequence.”

[35] But this issue does not justify a stay of this proceeding. Protections are in place and can be put into place to make sure that this potential infringement of Charter section 11(c) does not happen while the action proceeds. There is the implied undertaking rule, Rule 30.1 of the Rules of Civil Procedure, which protects any evidence given at discovery. Rule 30.1(2) specifies that “all parties and their lawyers are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained.” Rule 30.1(1)(ii) expressly states that the rule applies to examinations for discovery.

[36] Concerning all other evidence that Messrs. Hall and Caruk may give in this action, the court could always use its authority to seal the file in this case until further order of the court. This would insure that the trial evidence of Messrs. Hall and Caruk could not be used by the public and in the OCJ proceeding without a further court order. These existing and potential protections should more than adequately address the concerns Messrs. Hall and Caruk have about self-incrimination without requiring a stay.

[37] In their factum, CH counsel made the further argument that this entire action is “premature” and could lead to “double recovery.” This argument turns on the premise that the Tarion warranties cover the same deficiencies that the Maciels claim. Therefore, so the argument goes, Tarion should determine whether the Maciels receive compensation under the ONHWPA before this court determines the Maciels’ damages in this action, as otherwise there may be double recovery.

[38] I do not accept this argument. As stated earlier, I do not accept that the Tarion statutory warranties necessarily cover the same deficiencies the Maciels have raised. There is also no evidence in the motion material as to what the Maciels claim as deficiencies. Furthermore, and most importantly, should Tarion give coverage for the Maciels’ deficiency claims, there is no evidence in the motion that Tarion will not account for any recovery the Maciels obtain from CH.

[39] As to the prejudice to the Maciels of a stay order, in my view the greatest prejudice to them would result from a stay of the entire action. Most of the Maciels’ pleading that are not the Overlapping Paragraphs predated their amendments to the Statement of Defence and Counterclaim, and do not relate to the issues before the OCJ. As indicated by Justice Stinson in Kuchar, the Maciels have a right to have these parts of the action proceed and the court should be reluctant to deny that right. This is particularly the case with this action as it a lien action governed by the Construction Act, R.S.O. 1990, c.C.30 (“CA”). Pursuant to CA section 67(1) lien actions are mandated to be “as far as possible of a summary character, having regard to the amount and nature of the liens in question.” Given this mandate, I must pursue ways to keep this action going.

[40] On the other hand, the prejudice to the Maciels of a limited stay pertaining only to the Overlapping Paragraphs would not be significant. The OCJ proceeding will move forward while the within action proceeds. I find that the OCJ proceeding is the better forum for the determination of whether CH was a “builder,” as it is a proceeding mandated by the ONHWPA and appears to involve Tarion, namely the corporation that administers the ONHWPA. No doubt the Maciels will be called to give evidence in that proceeding as they have already given Tarion evidence. Such a limited stay would also obviate the need for measures to protect Messrs. Hall and Caruk from self-incrimination.

[41] I want to add that I do not find an ulterior motive in the Maciels amended pleadings, such as the ulterior motive of attempting to influence the OCJ proceeding. The Maciels raised the issue of the Tarion registration in their original pleading, namely before they were aware of any criminal proceeding against CH and its principals. Also, the amendments deal with other issues, such as an increase in the Maciels’ damage claim and other warranties. I view the Overlapping Paragraphs as an enhancement of the original pleading concerning the Tarion registration issue that was born out of a concern, perhaps misplaced, that the alleged failure to register the project had deprived the Maciels of the Tarion warranties.

[42] I have, therefore, decided to stay this action only as it pertains to the Overlapping Paragraphs. This stay will remain in effect until further order of the court. I will not require that the stay remains until the OCJ proceeding is determined, as that proceeding may be resolved without a determination.

MOTION TO STRIKE

[43] This ground of the motion was not pursued in written and oral argument. I will not, therefore, make a decision in this regard. In any event, such a decision is obviated by the stay.

CONCLUSION

[44] I, therefore, stay this action as it pertains to the Overlapping Paragraphs until further order of this court.

[45] In light of this ruling, I would normally require the parties to reconvene before me for a telephone trial management conference in the near future to have me make new orders for the completion of the outstanding interlocutory steps. However, on March 15, 2020, the Chief Justice of the Superior Court suspended all court operations, including telephone conferences, due to the COVID-19 pandemic. The only exceptions are matters without which there will be “immediate and significant financial repercussions.” As a result, I find I have no choice but to defer such a telephone conference call until the present court suspension is lifted or reduced.

[46] As to the costs of this motion, both sides served and filed costs outlines. CH’s costs outline shows actual costs of $7,290.80, substantial indemnity costs of $5,839.84 and partial indemnity costs of $4,379.88. The Maciels’ costs outline shows $20,633.86 for substantial indemnity costs and $16,286.18 for partial indemnity costs.

[47] If the parties cannot otherwise agree as to costs, those seeking costs have up to and including April 9, 2020 to serve and file written submissions in this regard of no more than two pages. Any responding written submissions of no more than two pages must be served and filed on or before April 20, 2020. Any reply written submissions of no more than one page must be served and filed on or before April 23, 2020.

DATE: March 30, 2020 MASTER C. WIEBE