





CITATION:
Tarion Warranty
          Corporation v. Kozy, 2011 ONCA 795



DATE: 20111216



DOCKET: C53513



COURT OF APPEAL FOR ONTARIO



Rosenberg, MacPherson and Epstein JJ.A.



BETWEEN



Tarion Warranty Corporation



Appellant (Appellant)



and



David L. Kozy



Respondent (Respondent)



David Outerbridge, for the appellant



Martin J. Prost, for the respondent



Heard: September 8, 2011



On appeal from the judgment of Justice Donald Downie of the
          Ontario Court of Justice, dated December 31, 2010, dismissing the appeal from
          the acquittal of the respondent by Justice of the Peace Gerry Solursh of the
          Ontario Court of Justice, dated September 9, 2008, on two charges under
          section 22 of the
Ontario New Home Warranties Plan Act
.



MacPherson J.A.:




A.
INTRODUCTION

[1]

The appellant Tarion Warranty Corporation (Tarion) appeals from the
    decision of Justice Donald Downie of the Ontario Court of Justice dated
    December 13, 2010.  In that decision, Downie J. dismissed an appeal from
    Justice of the Peace Gerry Solurshs acquittal of the respondent David Kozy on
    two charges under the
Ontario New Home Warranties Plan Act
, R.S.O. 1990,
    c. O-31 (
ONHWP Act
).  Both judges based their decisions on a
    conclusion that Mr. Kozy was not a builder within the meaning of the term in
    the
ONHWP Act
.

B.
FACTS

(1)
The parties and
    events

[2]

Tarion is the corporation designated by regulation to administer the
ONHWP
    Act
.  The
ONHWP Act
is consumer protection legislation aimed at
    protecting purchasers of new homes in Ontario.

[3]

In 2006, Joseph and Irena Kobylinski purchased a rural property at 91
    Farlain Lake Road East in the Township of Tiny in Simcoe County.  In August
    2006, they entered into a contract with Mr. Kozy for the construction of a
    house on the property.  The contract provided:

The Contractor agrees to supply all the materials,
    and perform all the work... as described in the contract documents and as set
    out below.  The Work shall be done on the premises... which are owned by the
    Owner....

[4]

Mr. Kozy performed the majority of the construction work for a price of
    $153,594, including GST.  The Kobylinskis paid for several items outside the
    scope of the contract: $6,600 for driveway work and the septic system, $6,254
    for the well and water system connected to the house, and $4,458 for two
    fireplaces.

[5]

Mr. Kozy did not register as a builder under the
ONHWP Act
. The statute
    provides that:

1.         In this Act,

builder means a
    person who undertakes the performance of all the work and supply of all the
    materials necessary to construct a completed home whether for the purpose of
    sale by the person or under a contract with a vendor or owner;

[6]

Because he did not register, Mr. Kozy was charged with two offences
    under s.22(1)(b) of the
ONHWP Act
for violating ss. 6 and 12 of the
Act
,
    which provide:

6.         No
    person shall act as a vendor or a builder unless the person is registered by
    the Registrar under this Act.

12.       A
    builder shall not commence to construct a home until the builder has notified
    the Corporation of the fact, has provided the Corporation with such particulars
    as the Corporation requires and has paid the prescribed fee to the Corporation.

(2)
The trial

[7]

Justice of the Peace Solursh acquitted Mr. Kozy of both charges.  For
    the purpose of this appeal, the parties prepared an Agreed Statement of Facts
    which includes this summary of the Justice of the Peaces decision:

Justice of the Peace Solursh held that Mr. Kozy did
    not fall within the definition of builder or vendor.  He based his decision
    primarily on: (a) the fact that the construction contract was silent on the
    question of who would construct the major structural components of the
    Residence, and (b) what he described as an absence of evidence as to who
    performed this work.

(3)
The appeal

[8]

Justice Downie dismissed Tarions appeal from the Justice of the Peaces
    acquittal of Mr. Kozy.  In the Agreed Statement of Facts, the parties record
    this description of Downie J.s decision:

The issues of statutory interpretation were the
    same on appeal as they were at trial.  Also at issue on appeal was whether the
    decision of the Justice of the Peace at trial was unreasonable in light of the
    evidence.

The appeal judge held that the Justice of the Peace
    at trial had misapprehended the evidence regarding the role played by Mr. Kozy
    in building the Residence.  Downie J. stated at paragraph 20 of his Reasons for
    Judgment:

It is clear that the
    learned Justice of the Peace was in error when he stated on page six of his
    judgment There was no evidence before the court as to who performed these services,
    and at what cost, while he was referring to major structural components of the
    building such as footings, foundation, framing, plumbing and rough-in
    electrical.  There was evidence before the court by Mr. Kozy and Mr. Kobylinski
    that it was in fact Mr. Kozy who performed most of these services....  It is
    clear from the evidence... that Mr. Kozys workers did in fact do the majority
    of the work.  It is only the work that was evidenced in Exhibit #21 where Mr.
    Kobylinski acted as contractor and hired outside persons, other than Mr. Kozy,
    to do the work.  It is clear that Mr. Kozy was not doing the well drilling, the
    connection of the well to the house, the septic system and the connection of
    the septic system to the house, as well as certain fireplace work that was
    contracted out.

The appeal judge went on to consider whether Mr.
    Kozy qualified as a builder and vendor for purposes of the
ONHWP Act
,
    in light of the roles played by Mr. Kozy and by the Kobylinskis.

The appeal judge held that:

(a)       the addition of fireplaces by the
    Kobylinskis would not take the construction by David Kozy out of the definition
    of builder; and

(b)       the Kobylinskis involvement in
    arranging and paying for the well and septic system did take the construction
    by David Kozy out of the definition of builder.

(4)
Leave to appeal

[9]

By order dated March 24, 2011, Winkler C.J.O. granted Tarions
    application for leave to appeal pursuant to s. 131 of the
Provincial
    Offences Act
, R.S.O. 1990, c. P33.  In his endorsement supporting the order,
    the Chief Justice said, at para. 5:

The interpretation of the definition of builder
    is a question of law.  As to whether it is essential in the public interest,
    the issue of the definition of builder is central to the entire statute. 
    This is consumer protection legislation which affects any potential new home
    buyer in Ontario.

C.
ISSUE

[10]

The sole issue on the appeal is whether the appeal judge erred in his
    interpretation of the term builder as used in the
ONHWP Act
.

D.
ANALYSIS

[11]

The appeal judge noted that the definition of builder in the
ONHWP
    Act
is a person who undertakes the performance of all the work and supply
    of all the materials necessary to construct a completed home.  He concluded
    that the addition of fireplaces by the owners did not remove Mr. Kozy as the
    builder.  However, he reached the opposite result with respect to the owners
    separate arrangements for the installation of septic and well systems.  The
    core of his reasoning is contained in this passage:

The question in this case is, did Mr. Kozy and his
    workers do all of the work necessary to build a completed home.  In the view of
    the court they did not.  They did not do the septic system and they did not do
    the well.  There is no way a home could be described as a completed home that
    did not have an operational toilet and sewer system, whether connected to a
    municipal system or to a septic system and there is no way a home could be
    considered a completed home if it did not have a water system.  The Kobylinskis
    as owners arranged and paid for the installation of these systems.  Therefore,
    to this court it seems that Mr. Kozy is not a builder as defined in the Act,
    even as that term has been expanded by some of the case law.

[12]

With respect, I am not persuaded by this analysis.  In my view, the
    purpose of the
ONHWP Act
, the leading cases interpreting the term
    builder, and the facts of this case suggest that Mr. Kozy is a builder
    within the meaning of the
Act
.

(1)
The purpose of the
ONHWP Act

[13]

Justice MacFarland of this court recently had occasion to consider the
    purpose of the
Act
and, specifically, the implication  of that purpose
    for the interpretation of the term builder in
Tarion Warranty Corporation
    v. Boros
, 2011 ONCA 374, at paras. 20-22:

I begin with the observation of this court in
Ontario
    New Home Warranty Program v. Lukenda
. (1991), 2 O.R. (3d) 675 (Ont. C.A.),
    at p. 676;

The major purpose of the
Plan Act
is to
    protect purchasers of new homes by requiring that vendors and builders be
    screened for financial responsibility, integrity and technical competence. To
    assure public protection, it provides warranties, a guarantee bond and
    compensation in the event of loss by a purchaser resulting from dealings with a
    registrant.  In order to effect this purpose of the
Plan Act
, a
    broad and liberal interpretation of its provisions is appropriate.

This court further observed in
Mandos v. Ontario
    New Home Warranty Program
(1995), 86 O.A.C. 382 (Ont. C.A.), at p. 383:
    The
Ontario New Home Warranties Plan Act
,
R.S.O. 1990, c. O-13 is remedial legislation
    and should be given a fair and liberal interpretation.

The central issue in this case is whether the
    respondent meets the definition of builder as it is defined in the
ONHWP
    Act
.  It would appear that this question has not arisen in this court
    before. However, as outlined above, the prior jurisprudence of this court with
    respect to the
ONHWP Act
requires that a broad and liberal approach be
    taken to interpreting the meaning of the term builder in order to reflect the
    remedial purpose of the Act.

[14]

This approach requires an interpretation of builder that would cover
    persons who build a home but leave some work to be performed by the owner. 
    Courts have recognized that the
Act
contemplates that owners will often
    perform some work relating to a construction project: see, for example,
Ontario
    New Home Warranty Plan v. McPhail
, [1997] O.J. No. 4570, at para. 21 (C.J.),
    MacDonnell Prov. J. (discussing s. 13(2)(a) of the
ONHWP Act
, which
    provides that ONHWP warranties do not cover work supplied by the owner).  Given
    the purpose of the
Act
, it is important not to deny such owners New Home
    Warranty Program coverage.  To hold that a contractor who leaves some work to a
    homeowner is not a builder would therefore be inconsistent with the statutory
    scheme.

(2)
The leading cases

[15]

In several cases involving interpretation of the
ONHWP Act
,
    courts have articulated tests delineating when a person falls within the term
    builder.

[16]

In
JRC Developments Inc. v. Tarion Warranty Corp.
, 2010 ONSC
    6205, [2010] O.J. No. 5089, at para. 4 (Div. Ct.), Molloy J. said that whether
    a contractor is a builder involves consideration of who was responsible for
    completing the essential elements of the home and who had control over the construction
    of the home.

[17]

In
R. v. Segal
, 2006 ONCJ 80, [2006] O.J. No. 1034, at para. 54
    (C.J.), Reinhardt J. said:

In order to rationalize section 13(2)(a), which
    contemplates that an owner may provide some work or materials to the
    construction of the new home, with the definition of a builder, which refers
    to the provision of all work and materials,
the definition of a builder
    has been interpreted as meaning the provision of a significant portion of
    construction
.  A home is not taken outside of the purview of the
Act
only because the owner was responsible for some work or materials.  [Emphasis
    added.]

[18]

Applying these tests, a long line of decisions in the courts and before
    the Ontario Licence Appeal Tribunal and the Ontario Commercial Registration Appeal
    tribunal have held that the fact that an owner is responsible for the
    installation of water and septic systems does not mean that a contractor is not
    a builder under the
ONHWP Act
: see, for example,
Ontario
    (5319-ONHWPA-Claim), (Re)
[2009] O.L.A.T.D. No. 363, affd
JRC
    Developments Inc. v. Tarion Warranty Corp.
,
supra
;
R. v.
    Boissonneault
(14 July 2004), North Bay, unreported (C.J.);
Lam (Re)
,
    [1997] O.C.R.A.T.D. No. 92;
Ontario (2947-ONHWPA-Claim)(Re)
, [2006]
    O.L.A.T.D. No. 54; and
Staples (Re)
, [2006] O.L.A.T.D. No. 175.

[19]

The appeal judge was aware of this case law.  He said that [t]he
    existing cases have purported to try and get around the definition of
    builder and changed the definition from the one in the statute.

[20]

With respect, I do not agree.  The interpretation of the definition of
    builder in cases like
McPhail
,
JRC Developments Inc.
,
Segal
and
Boissonneault
is, in my view, consistent with the consumer
    protection purpose of the
ONHWP Act
, the wording of the definition of
    the word builder, and a contextual reading of the definition with other
    provisions of the
Act
, such as s. 13(2)(a).

(2)
Application to
    this case

[21]

Finally, once the proper definition of builder is set down, its
    application in this case is easy.  Mr. Kozy did almost all of the construction
    work on the new Kobylinski home.  The contract listed 12 separate categories of
    exterior work and about 20 separate categories of interior work to be performed
    by Mr. Kozy.  Mr. Kozy was responsible for constructing virtually the entire
    home. The only work outside Mr. Kozys responsibility related to the water and
    septic systems and two fireplaces.  The work done by Mr. Kozy cost $153,594. 
    The water and septic system work cost $12,854.  By either yardstick, Mr. Kozy
    was the builder.  The owners subsidiary participation in the construction
    project did not negate warranty coverage for them; nor did it remove the duty
    on Mr. Kozy to comply with the
ONHWP Act
.

E.
DISPOSITION

[22]

I would allow the appeal and order a new trial on both charges.  I would
    not award costs.

RELEASED:  December 16, 2011 (M.R.)

J.C. MacPherson J.A.

I agree M. Rosenberg J.A.

I agree G.J. Epstein J.A.


