We are often asked by condominium corporations whether an appeal of Tarion’s final decision letter will prevent them from commencing a separate civil action with respect to the same deficiencies.
The recent decision by the Ontario Court of Appeal in Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc. sheds some light on this issue.
In this case, the condominium corporation alleged two major construction defects. The first related to the sanitary system and the second related to the exterior cladding of the building.
Tarion denied the corporation compensation under the Ontario New Homes Warranties Plan Act (“Act”) with respect to both items.
With respect to the sewer claim, the corporation appealed Tarion’s decision to the License Appeal Tribunal, and added the developer as a party to the appeal. The appeal was then subsequently withdrawn, and the corporation decided to commence a separate civil action against the developer and Tarion.
With respect to the exterior cladding claim, the corporation also appealed the decision to the License Appeal Tribunal, and added the developer as a party. However, here the parties agreed to stay the License Appeal Tribunal hearing until the court made a determination as to whether the corporation’s civil action was an abuse of process in view of Tarion’s decision that both deficiencies were not compensable under the Act.
The initial Judge who heard the developer’s motion found that the action commenced by the corporation was not an abuse of process, on the basis that Tarion’s decisions were neither judicial decisions nor final decisions. In other words, if the decisions were still subject to review by the court, then the corporation would be free to commence a separate lawsuit which would deal with the same deficiencies.
The developer appealed the decision to the Ontario Court of Appeal. Interestingly, the appeal court agreed with the developer and Tarion that the Tarion decision letter is a “judicial and final decision,” and that Tarion is capable of exercising adjudicative authority when it makes decisions under the Act.
However, the Ontario Court of Appeal ultimately relied on the consumer protection aspect of the legislation in deciding that homeowners should not be limited in their ability to obtain relief by way of a separate court action. The Ontario Court of Appeal focused on several factors, one of them being that the Act fails to expressly preclude an action in the courts.
The appeal court’s finding that its decision is limited to the effect of Tarion’s decisions is of particular importance to condominium corporations. If, for example, a condominium corporation appeals a decision to the License Appeal Tribunal, and the Tribunal dismisses the appeal, a separate action seeking the same relief may be successfully prevented by the developer. This is a key distinction, as there was no ruling by the License Appeal Tribunal in the present case.
