FACTS

The Plaintiff condominium corporation brought a civil action against the defendant developer for two separate construction deficiencies – (i) a defect in the sanitary sewer system that caused toilets to overflow and flood townhouses with sewage and (ii) the systematic failure of the uninterrupted exterior cladding on the townhouses, which caused pervasive leaking. The developer sought to have the action dismissed as an abuse of process because the condominium corporation had previously made unsuccessful claims to Tarion for breaches of warranty pursuant to the Ontario New Home Warranties Plan Act (“ONHWPA”) and the appeal process provided in the Act had not been exhausted.

DECISION

Justice Corrick of the Ontario Superior Court of Justice denied the developer’s motion to strike the condominium corporation’s claims on the basis of abuse of process. She found that Tarion’s “concilitation” process, undertaken for the purpose of determining whether a defect is covered under the ONHWPA, was “more investigative than adjudicative,” and that in its role, Tarion was not a tribunal or administrative authority exercising an adjudicative function. As a result, the issue of whether the ONHWPA warranty covered one or both defects was found not to have been previously determined by judicial decision, and it was therefore properly before the Court. Justice Corrick further determined that there was nothing in the legislation requiring the condominium corporation to exhaust the appeal process under the ONHWPA before commencing a civil action, though she suggested that a decision by the appeal tribunal might amount to a judicial decision and prevent a claimant from pursuing a civil action.

IMPLICATIONS

Purchasers with defect claims (including condominium corporations as deemed owners of common elements under the ONHWPA) are not restricted to the recourse mechanism provided in the ONHWPA. Warranty claims can be initiated, denied and appealed under the ONHWPA process and still be the proper subject of a civil action, though there is some indication from the Court that a decision of the appeal tribunal established by the ONHWPA would prevent further litigation.