Executive Summary: Key Legal and Evidentiary Issues

• Judicial review was sought to challenge a warranty decision under the Ontario New Home Warranties Plan Act (ONHWPA).

• Tarion found 14 construction issues in breach of statutory warranties after a conciliation inspection.

• Adi argued its waterproofing repairs were sufficient and that Tarion ignored evidence and relied too heavily on internal guidelines.

• The builder also claimed it made a reasonable cash settlement offer that should have exempted it from a chargeable conciliation.

• Tarion’s decision to deem the conciliation “chargeable” resulted in a $3,000 fee and a public record entry against Adi.

• The Divisional Court upheld Tarion’s findings as reasonable, dismissing all of Adi’s claims.

Facts and procedural background

Adi Developments (Masonry the West) Inc. was the builder and vendor of a residential condominium complex in Burlington, Ontario, known as Masonry The West. Upon registration of the condominium declaration in March 2021, the statutory warranties under the Ontario New Home Warranties Plan Act (ONHWPA) commenced. The condominium corporation, Halton Standard Condominium Corporation No. 729, identified issues in the complex's common elements through first-year and second-year performance audits conducted by their engineer.

Adi undertook repairs, particularly involving water leakage in the underground garage. Its method involved injecting Sikacrete, a concrete compound, from the underside of the garage roof slab. The condominium’s engineers disputed the sufficiency of those repairs and ultimately requested a conciliation by Tarion Warranty Corporation, the administrative body tasked with enforcing ONHWPA.

Tarion conducted an inspection and subsequently issued a decision stating that 14 items were in breach of the one-year or two-year statutory warranties. It also concluded that the conciliation was "chargeable" to Adi, resulting in a $3,000 fee and a 10-year public record of the chargeable conciliation on the Ontario Builder Directory.

Adi applied for judicial review, arguing that Tarion’s findings were unreasonable, both in determining that warranty breaches occurred and in making the conciliation chargeable.

Tarion’s findings and rationale

The garage roof slab was the central issue. Tarion found that water infiltration and risk of chloride exposure to steel reinforcement had not been adequately addressed by Adi’s injections from below. Instead, Tarion concluded that proper remediation required addressing the waterproofing from the top side of the slab to meet Building Code requirements and performance guidelines. Tarion also relied on its Common Element Construction Performance Guidelines and CSA S413 standards cited in the Building Code.

Adi also raised concerns about the chargeability determination. It claimed to have offered reasonable cash settlements—initially $10,000, later increased to $25,000—for several items before and during the conciliation. Tarion rejected the applicability of the settlement offer exception, citing vague terms, insufficient timing, and lack of clarity as to which items the offer covered.

For one item involving “tenting” in a waterproof membrane, Adi submitted that it was merely cosmetic and provided a manufacturer’s bulletin stating that such bubbling did not affect waterproofing performance. Tarion disagreed, finding detachment of the membrane to be a materials and workmanship defect under the one-year warranty.

Court’s analysis and ruling

The Divisional Court applied the standard of reasonableness under the Supreme Court’s decision in Vavilov. The Court emphasized that deference is owed to specialized administrative decision-makers like Tarion, especially on technical construction issues and interpretation of their own guidelines.

The Court rejected Adi’s submission that Tarion unlawfully fettered its discretion by relying on internal guidelines. It held that Tarion’s use of the CE-CP Guidelines and Registrar Bulletins was reasonable, given that they are contractually binding on builders and grounded in the ONHWPA and Building Code. The Court also upheld Tarion’s evidentiary findings regarding chloride exposure and corrosion risk, accepting the evidence of water staining and crack locations beneath chloride-exposed surfaces.

Regarding the settlement offer exception, the Court found that Tarion acted reasonably in concluding the offer did not meet the required standards. It lacked specificity, was made too close to the conciliation date, and was insufficient in amount. Even if the exception applied to some items, the Court confirmed that only one warranted item without an applicable exception is enough to render a conciliation chargeable.

Lastly, the Court found that Adi had not demonstrated that Tarion ignored new or unexpected issues that would qualify for a different exception. For the exposed cladding item, the Court accepted Tarion’s conclusion that it was part of an incomplete earlier repair, not a new issue.

Conclusion and disposition

The Court concluded that Tarion’s decisions were reasonable, justified, and supported by the record. Adi’s application for judicial review was dismissed. The Court ordered Adi to pay $25,000 in costs to Tarion.