Executive Summary: Key Legal and Evidentiary Issues

• Procedural fairness breached when Tarion revisited the retaining-wall issue without notifying the builder or sharing the purchaser’s new materials

• Conciliation Assessment Report (Jan. 12, 2023) was not a final decision; Tarion could reopen issues pre-final decision if it followed a fair process

• Five-day response window (Sept. 2024) and a communication implying liability and quantum were already decided undermined the right to be heard and the appearance of fairness

• Changed circumstances (city reopening permit; pool-related grading) did not negate the builder’s right to notice and a meaningful chance to make submissions

• Court quashed Tarion’s finding and remitted for a fresh, fair process; it declined to opine on the substantive reasonableness of Tarion’s merits decision

• Costs awarded to the builder: $15,000 partial indemnity; amount in dispute about $45,000

Background and facts
A homeowner raised 23 issues with Tarion under the Ontario New Home Warranties Plan Act regarding a new home that included a swimming pool. In a Conciliation Assessment Report dated January 12, 2023, Tarion accepted that the City had inspected and approved the property; therefore, the absence of a retaining wall was not treated as a warranted defect at that time. Later, following communications from the purchaser that included additional documents and submissions, Tarion changed course on September 5, 2024, and directed the builder to pay $45,688.71 (including HST) for the cost of constructing a retaining wall. Midnight Building Corp. was not told Tarion was revisiting the issue and did not receive the purchaser’s additional materials.

Procedural history and issues
Midnight Building Corp. applied to the Divisional Court. The panel allowed the application at the conclusion of oral argument and issued reasons thereafter. The central issues were whether Tarion could revisit its earlier, non-final assessment and whether Tarion afforded procedural fairness—namely, adequate notice and a meaningful opportunity for the builder to respond before imposing liability and quantum.

Court’s analysis on procedural fairness
The Court held the process was unfair. Midnight reasonably believed the retaining-wall issue had been resolved in January 2023 and received no notice that Tarion was reconsidering it. The September 2024 communication read as a determination of liability and amount, not a call for submissions, and Tarion gave only five days to respond without sharing the purchaser’s new materials. This sequence created both actual and apparent unfairness. Referring to foundational principles of administrative fairness (including notice and the right to be heard), the Court concluded Midnight was entitled to notice and a meaningful opportunity to make submissions before Tarion changed its position.

Jurisdiction to revisit issues and functus officio
While the builder argued Tarion lacked jurisdiction to reverse its earlier disposition, the Court clarified that Tarion is generally functus officio only after a final decision. A Conciliation Assessment Report is not a final decision; it is a provisional step in an ongoing process. Tarion may reopen issues prior to a final decision—without a formal reconsideration policy—so long as it uses a fair process. The Court emphasized it was not creating a rigid rule barring Tarion from revisiting its own decisions in appropriate circumstances (e.g., correcting minor errors, formal reconsideration, or changed circumstances), provided the statutory scheme and fairness requirements are respected.

Findings on changed circumstances
Tarion argued the builder knew or should have known the issue could be revisited because the City later reopened the building permit, required remedial work related to pool/grading, and the purchasers undertook remedial measures after rejecting the builder’s proposed retaining-wall approach. The Court accepted that this context explained why the issue was revisited, but it did not displace the builder’s right to fair notice and a real chance to respond before Tarion imposed liability and quantum.

Disposition and costs
The Court quashed Tarion’s finding and remitted the matter to Tarion for a new decision following a fair process. It expressly declined to comment on the reasonableness of Tarion’s substantive conclusion. Costs were awarded to the builder on a partial indemnity basis, fixed at $15,000, noting the case was not complex and the amount in dispute was about $45,000.