



COURT OF APPEAL FOR ONTARIO

CITATION:
Metropolitan
    Toronto Condominium Corporation No. 1352 v.
Newport Beach Development Inc., 2012 ONCA 850

DATE: 20121204

DOCKET: C54462

Winkler C.J.O., Laskin and Watt JJ.A.

BETWEEN

Metropolitan Toronto Condominium Corporation No.
    1352

Plaintiff (Respondent)

and

Newport Beach Development Inc.,
    Canderel Stoneridge Equity Group Inc., Tarion Warranty Corporation
, Enersys
    Engineering Group Inc., Eric Pun a.k.a. E.P.K. Pun and
Salvatore
    Spampinato a.k.a. Sal Spampinato

Defendants (
Appellants/Respondent
)

Irving Marks and Carla Lubell, for the appellants

David Outerbridge, for the respondent Tarion Warranty
    Corporation

Blaine Fedson, for the respondent Metropolitan Toronto
    Condominium Corporation No. 1352

Heard: April 2, 2012

On appeal from the order of Justice Katherine B. Corrick
    of the Superior Court of Justice, dated September 16, 2011, with reasons
    reported at 2011 ONSC 5445.

Laskin J.A.
:

A.

INTRODUCTION

[1]

Newport Beach Development Inc., along with Canderel Stoneridge Equity
    Group Inc. and Sal Spampinato, appeal the dismissal of their Rule 21 motion.

[2]

The respondent Metropolitan Toronto Condominium Corporation No. 1352
    (Metro 1352) manages a luxury condominium project in Etobicoke near the shore
    of Lake Ontario.  It alleges that the project has two major construction
    defects.  It claims that the sanitary sewer system was not built properly,
    causing toilets in the condominium units to overflow and the units themselves
    to flood with sewage.  It also claims that a systemic failure of the exterior
    cladding over the project, called the exterior insulated finish system
    (EIFS), has caused water penetration in the condominium units.

[3]

Metro 1352 sought compensation for these two defects under the
Ontario
    New Home Warranties Plan Act,
R.S.O. 1990, c. 0.31 (the Act). The
    administrator of the Act, the respondent Tarion Warranty Corporation, denied
    compensation.  Instead of appealing Tarions decisions to the Licence Appeal
    Tribunal, as it was entitled to do, Metro 1352 started this litigation.  It has
    sued Newport, the vendor and declarant of the project; Canderel, a developer
    related to Newport; Spampinato, an officer of Canderel; Enersys Engineering
    Group Ltd. and Eric Pun, the engineers on the project; and Tarion.  It has
    asserted causes of action for breach of statutory warranty, negligence, breach
    of fiduciary duty and breach of contract.  The engineers have been noted in
    default.  The other defendants have not delivered a statement of defence.

[4]

On its Rule 21 motion Newport asked for various forms of relief, but
    principally for an order dismissing the action on the ground that the
    litigation is an abuse of process.  Newport argued that Tarions decisions
    denying warranty coverage could only be reviewed by an appeal to the License
    Appeal Tribunal.  Either the doctrine of issue estoppel or the rule against
    collateral attack prevented Metro 1352 from re-litigating its claim by a civil
    action.  The motion judge, Corrick J., disagreed and dismissed the motion in
    its entirety.

[5]

On its appeal Newport raises three issues, which I put in the form of
    questions:

(1)

Did the motion judge err by failing to dismiss Metro 1352s claims
    relating to defects in the sanitary sewer system and the EIFS, both against
    Newport and Tarion, as an abuse of process?

(2)

Did the motion judge err by failing to dismiss the claim for breach of
    warranty for defects in the sanitary sewer system on the ground that they do
    not constitute a major structural defect under s. 13(1)(b) of the Act?

(3)

Did the motion judge err by failing to dismiss the claim for defects in
    the EIFS on the ground that the claim was a new cause of action added by
    amendment to the statement of claim after the expiry of the limitation period?

[6]

Tarion supports Metro 1352s right to maintain a civil action against
    both it and Newport, although for reasons different from those given by the
    motion judge.

B.

RELEVANT BACKGROUND

(1)

The legislative and regulatory framework
    under the
Ontario New Home Warranties Plan Act

[7]

The purpose of the Act is to protect the owners of new homes. One way
    the legislature sought to accomplish this was to stipulate certain warranties
    deemed to be given by vendors to homeowners, and to provide compensation for
    breach of these warranties out of a statutorily created guarantee fund.

(a)

Statutory warranties and compensation for their
    breach

[8]

Section 13(1) sets out the statutory warranties:

Every
    vendor of a home warrants to the owner,

(a) that the home,

(i) is constructed in a
    workmanlike manner and is free from defects in material,

(ii) is fit for
    habitation, and

(iii) is constructed in
    accordance with the Ontario Building Code;

(b) that the home is free of major structural
    defects as defined by the regulations; and

(c) such other warranties as are prescribed by the
    regulations.

[9]

Section 13(6) provides that owners and vendors cannot contract out of or
    waive these warranties.

[10]

Section
    14(3) provides for compensation for breach of the warranties in s. 13(1):

Subject to the regulations, an owner of a home is
    entitled to receive payment out of the guarantee fund for damages resulting
    from a breach of warranty if,

(a) the person became the owner of the home
    through receiving a transfer of title to it or through the substantial
    performance by a builder of a contract to construct the home on land owned by
    the person; and

(b) the person has a cause of action against the
    vendor or the builder, as the case may be, for damages resulting from the
    breach of warranty.

[11]

Section
    14(4) deals specifically with compensation for damage because of a major
    structural defect:

Subject to the regulations, an owner who suffers
    damage because of a major structural defect mentioned in clause 13 (1)(b) is
    entitled to receive payment out of the guarantee fund for the cost of the
    remedial work required to correct the major structural defect if the owner
    makes a claim within four years after the warranty expires or such longer time
    under such conditions as are prescribed.

[12]

Section
    15(a) provides that, for the purposes of ss. 13 and 14, a condominium
    corporation, such as Metro 1352, shall be deemed to be the owner of the common
    elements of the corporation, and thus the beneficiary of the statutory
    warranties for the common elements.

[13]

The
    duration of the statutory warranties for construction defects ranges from one
    to seven years. The protection given to owners under the Act is, however,
    limited in the following ways:

·

An owner may only make a claim against Tarion for a vendors
    breach of a statutory warranty; an owner has no claim against Tarion for any
    common law causes of action.

·

An owner may not make a claim for compensation from the guarantee
    fund for damage caused by someone other than the vendor.

·

An owners claims against Tarion are limited to remedying the
    defect and any damage to the features of the home directly caused by the
    defect; an owner has no claim against Tarion for other damage, such as personal
    injury or property damage.

·

An owners recovery from the guarantee fund is capped by dollar
    limits set out in the regulation passed under the Act.

Because of these limits on the statutory protection available
    to homeowners, s. 13(6) of the Act provides that the statutory warranties are
    in addition to any other rights the owner may have, including any other agreed
    upon warranty.

(b)

The role of Tarion Warranty Corporation

[14]

Tarion,
    a non-profit corporation, was created under s. 2 of the Act to administer the
    Ontario New Home Warranties Plan.  Tarion also established and administers the
    guarantee fund for the payment of compensation under s. 14, and assists in
    conciliating disputes between vendors and owners.

[15]

If
    a homeowner believes that a statutory warranty has been breached, and that the
    vendor has not remedied the breach, the homeowner may make a claim to Tarion in
    accordance with the regulatory framework set out for administering the Act in
Administration
    of the Plan
, R.R.O. 1990, Reg. 892 (Regulation 892).

[16]

Tarion
    describes the claims adjudication process under Regulation 892 in its factum.  Once
    a claim is made, the vendor has a specified amount of time to repair the alleged
    defect.  If the vendor does not remedy the defect, Tarion will try to resolve the
    dispute by conciliation.  Typically Tarion gathers information about the
    alleged defect and conducts an on-site inspection of the property.  Both the
    homeowner and the vendor are given the opportunity to submit arguments, expert
    evidence, documents, and information from relevant witnesses.

[17]

In
    cases where the dispute is not resolved by conciliation, Tarion issues a
    warranty assessment report, which is a preliminary assessment of whether an
    alleged defect is covered by a statutory warranty.  If, as occurred in the
    present case, an owner disputes Tarions conclusion on warrantability in the
    warranty assessment report, Tarion will adjudicate the owners claim for
    compensation under s. 14 of the Act by issuing a formal decision letter.  Section
    16(1) of the Act requires that Tarion give the owner notice of the decision,
    together with reasons.

(c)

The Licence Appeal Tribunal

[18]

Under
    s. 16(2) of the Act, an owner dissatisfied with a decision of Tarion is
    entitled to a hearing before the Licence Appeal Tribunal.  Only a Tarion
    decision that a claim is not warrantable is reviewable before the Tribunal.  A
    vendor has no right to appeal a Tarion decision that a claim is warrantable.

[19]

Section
    16(4) of the Act prescribes the persons who are parties to the proceeding
    before the Tribunal.  They include Tarion, the person or owner who has asked
    for the appeal, and any other person the Tribunal may specify, typically the
    vendor to the dispute.  The hearing before the Tribunal is a trial
de novo
on the issue of warrantability.  It is conducted in accordance with the
    Tribunals rules for procedure, disclosure and evidence: see Ontario, Licence
    Appeal Tribunal,
Rules of Practice
.

[20]

Section
    16(3) of the Act sets out the Tribunals powers.  They are limited to directing
    Tarion to take such action as the Tribunal considers [Tarion] ought to take in
    accordance with this Act and the regulations.  In exercising its powers, the
    Tribunal may substitute its opinion for that of Tarion.

[21]

Under
    s. 11(1) of the
Licence Appeal Tribunal Act, 1999
, S.O. 1999 c.12,
    Sch. G, either party to a proceeding before the Tribunal may appeal from its
    decision to the Divisional Court.

(d)

A vendors review rights

[22]

As
    I have said, a vendor has no right to challenge before the Licence Appeal
    Tribunal a Tarion decision that a homeowners claim is warrantable. However, a
    vendor is not without recourse for an adverse warranty decision.  For example,
    a vendor may challenge a Tarion warranty decision by a full arbitration hearing
    in the Builder Arbitration Forum.

(2)

Metro 1
35
2s warranty
    claims

(a)

The sanitary sewer system claim

[23]

Before
    starting its lawsuit, Metro 1352 claimed compensation from the Tarion guarantee
    fund for breach of warranty pertaining to the sanitary sewer system.  Metro
    1352 first reported its claim in August 2002, and submitted further
    documentation in the summer of 2005.  After inspecting the project, Tarion
    issued a decision letter in September 2005 disallowing Metro 1352s claim.

[24]

Metro
    1352 appealed Tarions decision to the Licence Appeal Tribunal.  At the request
    of Tarion, Newport was added as a party to the appeal.  Pre-appeal hearings
    took place.  However, six days before the appeal was to be heard, Metro 1352
    withdrew its appeal.  Before doing so, it obtained Tarions assurance that
    Tarion would not plead
res judicata
should Metro 1352 start a civil
    action and name Tarion as a defendant.  Newport was not asked to provide a
    similar assurance.

[25]

Metro
    1352 started its lawsuit shortly after withdrawing its appeal.

(b)

The EIFS claim

[26]

Metro
    1352 also brought a warranty claim for payment from the Tarion guarantee fund
    pertaining to the EIFS defects.  It first gave notice of this warranty claim to
    Tarion in November 2007, by which time it had started its civil action.  In
    April 2008, Metro 1352 asked Tarion to conciliate its claim.  Conciliation did
    not resolve the dispute.  In July 2008, Tarion issued a warranty assessment
    report, which concluded that the EIFS defects claim was not warrantable.  In
    October 2010, Tarion issued a decision letter formally denying compensation
    from the fund.

[27]

In
    November 2010, Metro 1352 appealed Tarions decision to the Licence Appeal
    Tribunal.  As with the appeal on the sanitary sewer system claim, at Tarions
    request, Newport was added as a party to this appeal.  The appeal to the
    Licence Appeal Tribunal has been stayed pending the outcome of the appeal
    before this court.

(3)

The litigation

[28]

Metro
    1352 delivered a statement of claim in August 2006, and an amended statement of
    claim in July 2010.  It has sued Newport, Tarion and several other parties.  It
    alleges not only breaches of the statutory warranties under s. 13 of the Act,
    but also negligence, breach of contract and breach of fiduciary duty.  It
    claims $2.7 million for repair costs, which exceeds the maximum statutory limit
    of recoverable compensation of $2.5 million.  It also asks for $150,000 in
    exemplary damages, which are not an included item for recovery under the Act.

[29]

Metro
    1352 agreed that the defendants did not have to deliver a statement of defence
    while Tarion was attempting to conciliate the disputes.  Although conciliation
    was unsuccessful, no statement of defence has been delivered.

C.

analysis

First Issue  Did
    the motion judge err by failing to dismiss Metro 1352s claims relating to
    defects in the sanitary sewer system and the EIFS as an abuse of process?

[30]

Newport
    moved under r. 21.01(3)(d) of the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194, to dismiss Metro 1352s claim for defects in the sanitary sewer
    system and the EIFS as an abuse of process.  Newport sought the dismissal of
    these claims both against it and the parties related to it, and against Tarion.
     The motion judge dismissed Newports abuse of process motion.  Newport submits
    that she erred in doing so.  I will consider separately Metro 1352s action
    against Newport and the parties related to it and Metro 1352s action against
    Tarion.

(1)

Metro 1352s action against Newport

[31]

Newport
    argues that allowing Metro 1352 to maintain this action against it and the
    parties related to it is manifestly unfair and amounts to an abuse of process.  This
    argument has three prongs:

·

Issue Estoppel
 Tarion has made a
    final and judicial determination of Metro 1352s claims; thus, issue estoppel
    prevents Metro 1352 from re-litigating these claims in another forum;

·

Collateral Attack
 Metro 1352s
    civil action is an impermissible collateral attack on Tarions decisions; if
    Metro 1352 wishes to challenge Tarions decisions, it must do so by an appeal
    before the Licence Appeal Tribunal, the administrative body intended by the
    legislature to review Tarion decisions;

·

Section 23 of the Purchase Agreements
 Section 23 of the purchase agreements between Newport and the homeowners
    precludes claims for negligence, breach of contract, breach of fiduciary duty,
    and any warranties apart from those provided for under the Act.

(a)

Issue estoppel

[32]

Issue
    estoppel and collateral attack are two doctrines intended to prevent abuse of
    the process of decision making.  Issue estoppel prevents a party from
    re-litigating in one forum an issue already decided in another forum.  It rests
    on the idea that a litigant should be able to rely on the decision of an
    authoritative adjudicator being final and binding on the other party: see
British
    Columbia (Workers Compensation Board) v. Figliola
, 2011 SCC 52, [2011] 3
    S.C.R. 422, at para. 1.

[33]

As
    Ive explained above, Metro 1352 has sued Newport for negligence, breach of
    contract and breach of fiduciary duty, as well as for breach of the statutory
    warranties.  Section 13(6) of the Act provides that the statutory warranties
    are in addition to any other rights a homeowner may have.  Therefore, subject
    to Newports argument on s. 23 of the purchase agreements, Metro 1352 is
    entitled to pursue its common law causes of action in the Superior Court.  The
    narrow question Newports appeal raises is whether issue estoppel forecloses a
    civil action on the statutory warranties or whether applying issue estoppel
    would work an injustice.

[34]

It
    is now well accepted that a decision made by an administrative tribunal or
    officer can give rise to issue estoppel: see
Danyluk v. Ainsworth
    Technologies Inc.
, 2001 SCC 44, [2001] 2 S.C.R. 460;
British Columbia
    (Workers Compensation Board) v. Figliola
, at para. 27.  Tarion, though a
    private corporation, was established under a statute to administer a
    legislative regime.  The decision of a Tarion field claim representative,
    acting as an administrative officer, may therefore be subject to the operation
    of issue estoppel.

[35]

However,
    as Binnie J. emphasized in
Danyluk,
at para. 33, the underlying
    purpose of issue estoppel is to balance the public interest in the finality of
    litigation against the public interest in ensuring justice is done in a
    particular case.  This balancing requires the court to undertake a two-step
    analysis.  At the first step, the court determines whether the moving party 
    here Newport  has established the preconditions to the application of issue
    estoppel.  If it has, at the second step, the court determines, in its
    discretion, whether issue estoppel ought to be applied or whether applying it
    would work an injustice.

[36]

The
    preconditions for applying issue estoppel are well-established: see
Angle
    v. Minister of National Revenue
, [1975] 2 S.C.R. 248;
Danyluk
, at
    paras. 35-61.  To apply issue estoppel to Metro 1352s civil action, Newport
    had to establish that:

·

Tarion decided the same question or issues now raised in the
    action;

·

Tarions decisions were judicial decisions;

·

Tarions decisions were final decisions; and,

·

The parties or their privies to Tarions decisions were the same
    persons as the parties or their privies to the civil action.

[37]

The
    motion judge held that Newport had not made out the preconditions for issue
    estoppel because Tarions decisions were neither judicial decisions nor final decisions.
     Both Newport and Tarion submit that the motion judge erred in her holding.  They
    contend that Tarion decisions are judicial decisions and final decisions for
    the purpose of applying issue estoppel.

[38]

However,
    their positions then diverge.  Newport says that it has satisfied the
    preconditions for issue estoppel, and the court should apply issue estoppel and
    dismiss Metro 1352s action as an abuse of process.  Tarion says that issue
    estoppel does not bar Metro 1352s action because the plaintiff has two
    alternative ways to challenge a Tarion decision: either by an appeal to the
    Licence Appeal Tribunal or, the way it chose, by an action in the Superior
    Court.  In other words, because the court action is, in essence, a review rather
    than a re-litigation of Tarions decisions, issue estoppel does not apply.

[39]

For
    reasons that I will explain, I agree with Newport and Tarion that for the
    purpose of applying issue estoppel, Tarions decisions are judicial and final
    decisions.  I do not agree with either party on what flows from that
    determination.

[40]

Assuming
    the other preconditions for applying issue estoppel have been met  and I have
    considerable doubt about the same parties requirement  Tarion decisions could
    give rise to issue estoppel and bar Metro 1352s statutory warranty claims in
    the Superior Court.  However, I would exercise my discretion not to apply issue
    estoppel to the Tarion decisions because doing so would work an injustice. 
    Thus, although for different reasons, I reach the same conclusion as the motion
    judge and Tarion and would not grant Newports motion to dismiss the claim
    against it as an abuse of process.

[41]

Before
    dealing with the preconditions for applying issue estoppel and the courts
    discretion not to apply it, I will explain briefly why I do not accept Tarions
    position.  Tarion argues that a homeowners civil action against a vendor is a
    statutorily permitted method of reviewing Tarions decisions. Therefore,
    issue estoppel could never bar the homeowners claim.  My short answer to this
    argument is that the statute does not support Tarions position.

[42]

The
    Act authorizes only one method for reviewing a Tarion decision: an appeal to
    the Licence Appeal Tribunal.  The Act does not preclude a civil action against
    the vendor on the statutory warranties.  But, the Act does not expressly say,
    as it does in respect of appeals to the Tribunal, that a homeowner can appeal or
    review a Tarion decision by commencing a civil action.  All that the Act
    expressly preserves  in s. 13(6)  is the homeowners other rights against the
    vendor.  The Acts silence, in my opinion, shows that a civil action is not a
    statutorily authorized review or appeal of a Tarion decision that would
    automatically preclude issue estoppel.  Therefore, Newport can invoke issue
    estoppel if the preconditions for applying it are met, and applying it would
    not work an injustice.

(i)

First step: have the preconditions for issue estoppel
    been met?

Same
    questions or issues


[43]

The
    motion judge did not address this requirement.  I am prepared to accept that
    the questions before Tarion  whether Newport breached the statutory warranties
    set out in the Act  are also raised in the litigation.  At least to that
    extent, the amended statement of claim raises the same questions that were
    decided by Tarion.  In the light of my finding that issue estoppel should not
    apply in this case, it is unnecessary to determine the extent to which Tarions
    decisions on that issue would restrict the scope of Metro 1352s claims.

Judicial
    decision

[44]

The
    motion judge held that Tarion decisions were not judicial decisions.  She wrote
    at para. 30 of her reasons:

There is no evidence before me that Tarions decisions made in
    response to the Condominium Corporations warranty claims were judicial ones.
    The decisions were not made by a tribunal or administrative authority
    exercising an adjudicative function. Rather, the evidence is that the decisions
    were made by Tarion following a conciliation process. Conciliation is defined
    in s. 1 of the Administration Regulation as a process whereby the Corporation
    [Tarion] determines whether a disputed item listed on a notice of claim given
    to the Corporation under this Regulation, including section 4 or any of section
    4.2 to 4.6, is covered by a warranty and whether repairs or compensation are
    required.  Conciliation is an informal process during which Tarion
    investigates the claims made. There may be meetings between the parties, but
    there is no evidence before me to indicate that Tarion was performing an
    adjudicative function at the conciliation stage of the process or when it
    issued the Warranty Assessment Report or Decision Letter.

[45]

I
    take the opposite view.  Tarion decisions are judicial decisions. In
Danyluk
,
    at para. 35, Binnie J. confirmed that a decision will be a judicial decision if
    three criteria are met.  First, the decision was made by a body capable of
    receiving and exercising adjudicative authority.  Second, the decision was
    required to be made in a judicial manner.  And third, the decision in question
    was, in fact, made in a judicial manner.

[46]

Tarions
    two decisions disallowing Metro 1352s warranty claims satisfy these three
    criteria.

[47]

Tarions
    decisions meet the first criterion because Tarion was established by
    legislation with a statutory mandate to administer and adjudicate warranty
    claims.  Section 2(2) of the Act shows the legislatures intent that Tarion
    operate as an adjudicative body.  Under s. 2(2), Tarion is charged with determining
    claims under s. 14.  Tarion is also responsible for administering the guarantee
    fund and the program more generally.  However, Tarions dual role does not
    detract from its capacity to exercise adjudicative authority on the warranty
    claims.

[48]

A
    decision maker can perform non-judicial functions as well as judicial
    functions, and still meet the first requirement for issue estoppel: see
Danyluk
,

at para. 39. Administrative decision makers often play many roles in
    fulfilling their statutory mandate  for example, many administrative bodies
    engage in policy-making and analysis, or provide information and educational
    programming to the public.  Although Tarion is responsible for investigation
    and conciliation, it nonetheless is capable of exercising adjudicative
    authority when it makes decisions under s. 14.

[49]

Tarions
    decisions meet the second criterion  they are required to be made in a
    judicial manner  because, they must be made under a prescribed statutory and
    regulatory regime that reflects many of the characteristics of a judicial
    proceeding. Tarion receives written claims and factual information supporting
    these claims.  It makes findings of fact and applies these findings to the
    objective statutory and regulatory standards for warranty coverage and
    compensation.  Decisions based on findings of fact and the application of an
    objective legal standard to those facts is, as Binnie J. noted in
Danyluk
,
    at para. 41
,
characteristic of a judicial function.  Tarion must
    also give a written decision on the entitlement of a homeowner to warranty
    coverage, reasons for its decision, and notice of its decision to the
    homeowner.

[50]

Tarions
    procedures are far more informal than the procedures in a court action. 
    However, a decision makers determinations may still be judicial, even though
    its procedures are more flexible than those in a courtroom, and the decision is
    based on facts gathered by the decision maker: see
Minott v. OShanter
    Development Company Ltd.
(1999), 42 O.R. (3d) 321, at p. 335;
Knight
    v. Indian Head School Division No. 19,
[1990] 1 S.C.R. 653, at p. 685.

[51]

Counsel
    for Tarion pointed out, quite correctly in my view, that the administrative
    regime for decision making under which Tarion operates is more formal than the
    administrative regime under which Ontario
Employment Standards Act,
R.S.O.
    1990, c. E.14 (ESA) officers operate.  ESA officers make decisions in a very
    unstructured setting.  Typically they sit at their desks, review documents,
    make phone calls to gather information and, generally, have little direct
    contact with the parties.  Yet in
Danyluk
, the Supreme Court of Canada
    held that the decisions of these officers are judicial decisions: see paras.
    27-29, 41. Tarion decisions have more of the trappings of adjudication than ESA
    decisions, and therefore, against the benchmark of
Danyluk
, must be
    considered judicial decisions.

[52]

The
    Tarion decisions meet the third criterion because they were, in fact, made in
    the judicial manner I have just described. Tarions final decision letters on
    the sewer system and the EIFS claims show that the field claims representative
    in each case approached his determination in a judicial manner.  Each letter
    sets out the applicable legislative language, identifies the requirements the
    claimant is obliged to prove, details the evidence and observations on which
    the decision is based, and reaches a conclusion.  The reasons for the decision
    in each letter show that in making the determination the representative has
    applied the objective legal standard to the facts of the case.

[53]

For
    these reasons, I disagree with the motion judge that Tarions decisions are not
    judicial.

Final decisions

[54]

The
    motion judge also held that Tarions decisions denying Metro 1352 compensation
    were not final decisions.  She relied, at paras. 31-33 of her reasons, on two
    letters sent by Tarion officials in respect of the EIFS defects claim  one
    sent to Metro 1352 and the other sent to Metro 1352 and Newport. The first
    letter said, [i]f you appeal, Tarion is prepared to consider any new relevant
    information that supports your claim for compensation.  The second letter
    similarly said, [p]lease note that Tarion will consider all new documents and
    information properly disclosed to Tarion in the appeal and Tarion may re-assess
    its decision at any time.

[55]

The
    motion judge concluded, at para. 33, that these two letters showed Tarions
    decisions to be more investigative than adjudicative.  Further, she concluded
    that because the decisions that Tarion makes are subject to change if it
    receives new information, its decisions are not final.

[56]

Again,
    I take a different view.  I make two points.  First, that a judicial decision
    may be appealed does not affect the finality of the decision: see
Minott,
at
    p. 334-335;
Danyluk
, at para. 57.  A Tarion decision is still final if
    it is not challenged, or not successfully challenged, on review.

[57]

Second,
    Tarions correspondence saying that it would consider additional information once
    an appeal is launched is reasonable and does not undermine the finality of its
    decisions.  The hearing before the Licence Appeal Tribunal is a trial
de
    novo
.  The homeowner or the vendor can put forward new evidence.  Tarion,
    therefore, properly advised the parties that it would consider this additional
    evidence.  That it would do so does not make its own decisions any less final
    if they are not appealed.

Same parties

[58]

As
    I said earlier, I am dubious whether the same parties requirement has been
    met.  In the proceedings before Tarion, Newport was not a party in any formal
    sense.  Tarion was not required to give Newport notice of its decisions.  And
    Newport would have had no right to appeal a decision granting warranty coverage
    to the Licence Appeal Tribunal.

[59]

Active
    participation in an administrative proceeding might meet the same parties
    requirement of issue estoppel:  see
Minott
, at p. 336.  But Newports
    participation in Metro 1352s warranty claims before Tarion was sketchy at
    best.  The evidence shows that Newport did not participate at all in the
    proceedings leading to Tarions decision on the sanitary sewer system claim,
    and participated only modestly in the proceedings leading to Tarions decision
    on the EIFS claim.  In
Radewych v. Brookfield Homes (Ontario) Ltd.
,
    [2007] O.J. No. 2483, at para. 30, affd on other grounds 2007 ONCA 721, Gray
    J. similarly concluded that the same parties requirement of issue estoppel had
    not been met because the vendor Brookfield had not played any adversarial
    role with respect to the claim.

[60]

Overall,
    I am doubtful that the same parties requirement has been met.  Even it has,
    however, I would exercise the courts discretion not to apply issue estoppel
    because to do so would work an injustice.  This is the position put forward by Metro
    1352, and I agree with it.

(ii)

Second step: would applying issue estoppel work
    an injustice?

[61]

As
    I said above, Metro 1352 is entitled under s. 13(6) of the Act to pursue its
    common law causes of action against Newport in Superior Court.  Therefore, the narrow
    question on this appeal is whether issue estoppel forecloses a civil action on
    the statutory warranties or whether applying issue estoppel would work an
    injustice.

[62]

Issue
    estoppel promotes the orderly administration of justice, but it should not be
    applied at the cost of real injustice in an individual case: see
Danyluk
,
    at

para. 67.  In exercising its discretion to apply or not to apply
    issue estoppel in any given case, the court must be mindful of context.  The
    balancing exercise will vary with the nature of the proceedings in question.

[63]

Where
    the former proceeding was conducted by an administrative officer or tribunal,
    the court will necessarily enjoy a broader discretion to decline to apply issue
    estoppel than where the former proceeding was before another court.  This broader
    discretion arises from the enormous range and diversity of the structures,
    mandates and procedures of administrative decision-makers:
Danyluk,
at
    para. 62.   In determining whether justice would be done by applying issue
    estoppel, a judge must be free to consider the nature of the specific decision
    maker, the parties, the decision-making process, the statutory scheme, and the underlying
    legislative objectives.

[64]

The
    considerations that may bear on whether the operation of issue estoppel would
    work an injustice are open-ended: see
Danyluk
, at

para. 67.
Danyluk
lists a series of considerations applicable to that case: see paras. 68-81.
Minott
lists a similar series of considerations: see p. 341-343.

[65]

In
    the case before us, two considerations weigh in favour of applying issue
    estoppel.  First, Tarion has authority to grant significant financial
    compensation for breaches of the statutory warranties  up to $2.5 million for
    a claim relating to the common elements of a condominium project: Regulation
    892, s. 6(8).  There is not, in other words, a harsh statutory limit on
    recovery that would make closing the courtroom doors to complainants
    particularly unfair.

[66]

Second,
    Metro 1352 has a right to appeal an adverse warranty decision to the
    specialized body established by the legislation to review Tarion decisions, the
    Licence Appeal Tribunal.   Indeed, as Binnie J. said in
Danyluk,
at
    para. 50,

the unsuccessful litigant in administrative proceedings
    should be encouraged to pursue whatever administrative remedy is
    available."  From the Tribunals decision, the homeowner may exercise a
    further right of appeal to the Divisional Court.  Further, as I discuss later,
    a dissatisfied homeowner may bring an action against Tarion itself, as the
    administrator of the guarantee fund.  Therefore, Metro 1352 would not be left
    without any recourse if the possibility of a civil action against Newporton the
    statutory warranties was, by issue estoppel, foreclosed.

[67]

Weighed
    against these two considerations, however, are several considerations that make
    foreclosing a civil action against Newport unjust.  The most important of these
    considerations is the consumer protection purpose of the legislation.  Tarions
    mandate is to protect the rights of new home buyers and ensure that builders
    abide by the legislation.  An approach that promotes rather than limits the
    avenues a homeowner may pursue to obtain relief is consistent with that
    purpose.

[68]

A
    second and related consideration is the wording of the Act.  A major theme in
    the jurisprudence dealing with
res judicata
in the administrative law
    context is that parties should challenge the validity of an administrative decision
    through the appeal mechanism intended by the legislature: see
Danyluk,
at
    para. 74;
British Columbia (Workers Compensation Board) v. Figliola
,
    at para. 34.

[69]

This
    Act, however, does not contain any language to show that the legislature intended
    to preclude a civil action against the vendor on the statutory warranties and
    require homeowners to go to the Licence Appeal Tribunal.  Although the Act does
    provide for an appeal to the Tribunal, the language of s. 16(3) is permissive. 
    It says the homeowner is entitled to a hearing by the Tribunal, not that he
    or she shall or must proceed before the Tribunal to the exclusion of any
    other forum.

[70]

The
    language of the Act also bears on the weight to be given to any potential
    unfairness to the other party, in this case Newport.  I said earlier that issue
    estoppel rests on the idea that, in organizing their affairs, parties should be
    entitled to rely on the final and binding nature of certain adjudicated
    outcomes.  However, where an Act fails to expressly preclude an action in the
    courts, or specifically preserves a partys civil claims, a potential defendant
    should be on notice that an administrative decision may not be conclusive of
    liability.

[71]

A
    third consideration  one related to the consumer protection purpose of the Act
     is that claims to Tarion are meant to be a quick and relatively inexpensive
    way for homeowners to obtain relief for construction defects in their homes. 
    Holding that Tarions decisions could give rise to issue estoppel would make it
    more likely that its claim adjudication process would become more formal,
    costly and time-consuming: see
Machin v. Tomlinson
(2000), 51 O.R.
    (3d) 566, at para. 13;
Danyluk
, at para. 73.  This would not be
    desirable.

[72]

A
    fourth consideration is convenience.  Homeowners are entitled to sue for common
    law damages in the Superior Court, as Metro 1352 has done in this case. 
    Allowing homeowners to maintain all of their claims  including a claim for
    breach of the statutory warranties  against all parties in one forum has the
    advantage of convenience.

[73]

A
    fifth consideration is the avoidance of inconsistent results.  Metro 1352 has
    sued both Tarion and the vendor, Newport.  As I will discuss, a homeowner can
    sue Tarion for payment out of the guarantee fund.  In that action, Tarion
    cannot rely on issue estoppel (and indeed does not suggest that it can): 
    Tarion is not a party to its decisions; it is the decision-maker.

[74]

Thus,
    to say that a vendor such as Newport, can rely on issue estoppel when Tarion
    cannot, raises the real possibility of inconsistent results in cases such as
    this one, where the homeowner has sued both Tarion and the vendor.  Precluding
    the application of issue estoppel in favour of the vendor avoids this
    possibility.

[75]

A
    final consideration is the procedural differences between proceedings before
    Tarion and proceedings in the Superior Court.  In proceedings before Tarion, an
    aggrieved homeowner does not have the right to pre-hearing production and
    discovery, or the right to cross-examine representatives or witnesses for the
    vendor.  A plaintiff, of course, has these rights under our
Rules of Civil
    Procedure
governing Superior Court actions.  Again, it would be
    inconsistent with the purpose of the Act and the concern for real justice
    underlying the doctrine of issue estoppel to deprive a homeowner of this
    option.

[76]

Looking
    at these considerations cumulatively, I conclude that applying issue estoppel
    to Tarions decisions, and thus foreclosing a civil action against the vendor for
    damages for breach of the statutory warranties, would work a real injustice.

[77]

My
    conclusion is limited to the effect of Tarions decisions.  If, for example, a
    homeowner appealed a Tarion decision to the Licence Appeal Tribunal, and the Tribunal
    dismissed the appeal, a Superior Court action seeking the same relief may well
    be met with a successful plea of issue estoppel.  That scenario is not before
    us and need not be decided because Metro 1352 elected to abandon its appeal on
    the sanitary sewer system and its appeal on the EIFS has been stayed.

(2)

Metro 1352s claim against Tarion

[78]

Newport
    also asked that Metro 1352s action against Tarion be dismissed.  It seeks this
    relief because if Metro 1352 obtains a judgment against Tarion, then Newport is
    obliged to indemnify Tarion.  Newports obligation to indemnify arises under
    the Vendor/Builder Agreement between Newport and Tarion, the Subrogation
    provisions in Part V of Regulation 892, and the indemnification bond given by
    Newport to Tarion.

[79]

Newport
    makes two submissions in support of this part of its appeal.  First, it submits
    that Tarion is not a suable entity in the civil courts.  Second, it submits
    that s. 45 of the purchase agreements prevents Metro 1352 from suing any party
    other than Newport for breach of the statutory warranties.  The motion judge
    did not accept either submission, and in my view, she was right not to do so.

[80]

On
    the first submission, she noted at para. 45 of her reasons that Tarion itself
    says that a homeowner may bring a civil cause of action against it.  That is
    because Tarion is not only a decision-maker; it is the administrator of the
    guarantee fund.  A civil action against Tarion simply seeks payment out of the
    fund for breach of the statutory warranties.

[81]

Again,
    the wording of the Act is important.  Nothing in the Act precludes a civil
    cause of action against Tarion.  Further, s. 7(2) of Regulation 892
    specifically contemplates that a homeowner may obtain a judgment in a civil
    action against Tarion.  Under s. 7(1), Tarion is required to establish and
    maintain a guarantee fund under a contract with a licensed insurer.  Then s.
    7(2) states that under that contract, the insurer shall agree to indemnify
    Tarion for those sums which Tarion is obligated to pay by reason of settlement
    of any dispute, judgment, action or claim arising under the Plan.

[82]

In
Belanger v. 686853 Ontario Inc
. (1990), 74 O.R. (2d) 114 (Dist. Ct.),
    at p. 117, Wright D.C.J. held, correctly in my opinion, that a plaintiff
    homeowner has a right to sue the corporation administering the guarantee fund
    (now Tarion) because the homeowner has a clear statutory entitlement to
    payment if the prerequisites are met.  More recently, Maranger J. followed the
    decision in
Belanger
and allowed a homeowner to sue Tarion under s.
    14(3) of the Act for failing to pay from the fund damages for breach of
    warranty,: see
Ottawa-Carleton Standard Condominium Corp. No. 650 v.
    Claridge Homes Corp.
,  [2009] O.J. No. 2139.  Also, in
Radewych
,
    this court upheld the decision of Gray J. adding Tarion as a party defendant to
    civil proceedings.

[83]

Allowing
    a homeowner to bring an action against Tarion for payment from the fund is
    therefore consistent with the direction of the jurisprudence in this province
    and the language and consumer protection purpose of the Act.  Of course, the
    relief to which a homeowner would be entitled in an action against Tarion would
    be limited to the prescribed compensation for breach of the statutory
    warranties under the Act and Regulation 892.

[84]

Newports
    second submission relies on s. 45 of the purchase agreements, which states:

The Purchaser shall not have any claim or cause
    of action (as a result of any matter or thing arising under or in connection
    with this Agreement) against any person or other legal entity, other than the
    person or entity named as the Vendor in this Agreement.

[85]

The
    motion judge held at para. 47 of her reasons that s. 45 of the purchase
    agreements did not prevent Metro 1352 from suing Tarion.

Section 45 is a broadly worded exclusion clause
    drafted by Newport, the vendor. To the extent that there is any ambiguity in
    this clause, the ambiguity must be resolved in favour of the purchaser. In my
    view, the clause is ambiguous with respect to Tarion. It is not clear that
    Tarions statutory obligations under
ONHWPA
are
    matters arising under or in connection with the purchase agreement precluding
    any claim or cause of action against Tarion by the purchaser. Resolving the
    ambiguity in favour of the purchaser, the Condominium Corporation is entitled
    to bring an action against Tarion, and this claim is therefore not an abuse of
    process. I dismiss the motion to strike the claim against Tarion.

[86]

I
    agree with her reasons.  Accordingly, I would not give effect to Newports
    submission that Metro 1352s action against Tarion be dismissed as an abuse of
    process.

(b)

Collateral attack

[87]

The
    second prong to Newports argument that Metro 1352s civil action is an abuse
    of process rests on the rule against collateral attack.  Newport submits that
    if Metro 1352 wishes to challenge Tarions decisions it is required to do so by
    an appeal to the Licence Appeal Tribunal, the body specifically established by
    the legislature to review warranty decisions.  Challenging Tarions decisions
    by an action in the Superior Court amounts to an impermissible collateral
    attack on those decisions.

[88]

The
    rule against collateral attack seeks to maintain the rule of law and preserve
    the repute of the administration of justice.  The rule may be raised to
    prevent a party from using an institutional detour to attack the validity of
    an order by seeking a different result from a different forum, rather than
    through the designated appellate or judicial review route:
British
    Columbia (Workers Compensation Board) v. Figliola
, at para. 28.  Whether
    it applies is at bottom a question of the legislatures intent about the
    appropriate forum: see
R. v. Consolidated Maybrun Mines Ltd.
, [1998] 1
    S.C.R. 706.

[89]

Here,
    the question is whether the Act shows a legislative intent that the Licence
    Appeal Tribunal is meant to be the exclusive forum for challenging Tarions
    decisions.  The motion judge answered no to this question.  She said, at para.
    39:

There is nothing in the legislation that requires
    the Condominium Corporation to pursue all available remedies under
ONHWPA
before commencing a civil action. The legislature could have required
    that, as it has done in the
Workplace Safety and Insurance Act
, S. O. 1997, c. 16. Absent express language in the statute, I am
    unable to conclude that the Condominium Corporation is barred from seeking a
    remedy from the civil courts.

[90]

Gray
    J. made the same point in
Radewych,
at para. 25:

Before leaving this issue, I should say that I do not accept
    the submission that sections 13 and 14 of the
Act
constitute an
    exclusive statutory scheme to which resort must be held, to the exclusion of
    any court proceedings.  There is nothing in the
Act
to suggest that
    the statutory scheme is exclusive, or that resort to court proceedings is
    barred.  Indeed, the statute provides additional rights to those which a home
    buyer might otherwise have had.  Had it been the intention of the legislature
    to set up an exclusive scheme, it would have been simple to say so, but the
    legislature did not.

[91]

I
    agree with the motion judge and with Gray J.  The scheme and language of the
    Act show that an appeal to the Licence Appeal Tribunal is meant to be
    permissive  not the exclusive forum in which a homeowner may seek relief for
    an adverse Tarion decision on warrantability.

[92]

Moreover,
    several of the other considerations that bear on whether Tarion decisions give
    rise to issue estoppel also bear on whether a Superior Court action is an
    impermissible collateral attack on those decisions.  Thus, although the
    availability of an appeal to a specialized tribunal with court-like procedures
    weighs against permitting a court action, the consumer protection purpose of
    the legislation and the convenience of having all parties and all claims in one
    forum weigh heavily in favour of permitting a court action.

[93]

Overall,
    I conclude that Metro 1352s civil action in the Superior Court does not offend
    the rule against collateral attack.

(c)

Section 23 of the purchase agreements

[94]

The
    final prong in Newports abuse of process argument rests on s. 23 of the
    purchase agreements between it and the unit owners.  Newport submits that s. 23
    precludes Metro 1352 from suing for anything other than the breach of
    warranties in s. 13 of the Act.  Therefore, Newport argues that Metro 1352
    cannot maintain its claims for negligence, breach of contract and breach of
    fiduciary duty.

[95]

Section
    23 of the purchase agreements provides:

The Purchaser acknowledges and agrees that any
    warranties of workmanship or materials, in respect of any aspect of the
    construction of the condominium including the Unit, whether implied by this
    Agreement or at law or in equity or by any statute or otherwise, shall be
    limited to only those warranties deemed to be given by the Vendor under the
Ontario New Home Warranties Plan Act
,
R.S.O. 1990, c.O.31 (O.N.H.W.P.A.) and shall extend only for the time period
    and in respect of those items as stated in the O.N.H.W.P.A., it being
    understood and agreed that there is no representation, warranty, guarantee,
    collateral agreement, or condition precedent to, concurrent with or in any way
    affecting this Agreement, the Condominium or the Unit, other than as expressed
    herein.

[96]

The
    motion judge rejected Newports submission at para. 50 of her reasons:

This clause limits the warranties given by the
    vendor to the purchaser of the units to those expressed in
ONHWPA
. It does not exclude or limit a partys liability for negligence,
    breach of contract, breach of a statutory duty or breach of a fiduciary duty.
    It deals solely with warranties of workmanship and materials. In my view this
    clause does not preclude an action by the Condominium Corporation against the
    defendants for breach of contract, negligence or breach of fiduciary duty.

[97]

I
    agree with this paragraph.  I, therefore, would not give effect to this last
    prong in Newports argument.

[98]

Accordingly,
    I would not interfere with the motion judges decision that Metro 1352s claim
    against Newport and the parties related to it and Tarion should not be
    dismissed as an abuse of process.

Second Issue  Did the motion judge err by
    failing to dismiss Metro 1352s claim for breach of warranty for
defects
in the sanitary sewer system
on the ground they do not
    constitute a major structural defect
?

[99]

Metro
    1352 claims that the defects in its sanitary sewer system amount to a major
    structural defect.  Newport submits that the motion judge erred by failing to
    strike this claim because it does not fall within the definition of a major
    structural defect.

[100]

Section 13(1)(b)
    of the Act provides a statutory warranty that the home is free of major
    structural defects as defined by the regulations.  Section 1 of Regulation 892
    defines a major structural defect.  The definition excludes damage to drains
    or services.  In its material part, the definition reads as follows:

major structural defect means...

(b) in respect of a home that is enrolled after
    December 31, 1990 and that is not a post June 30, 2012 home, any defect in work
    or materials, including any defect that results in significant damage due to
    soil movement, major cracks in basement walls, collapse or serious distortion
    of joints or roof structure and chemical failure of materials, if the defect,

(i) results in failure of the load-bearing portion
    of any building or materially and adversely affects its load-bearing function,
    or

(ii) materially and adversely affects the use of
    such building for the purpose for which it was intended,

but does not include any defect attributable in whole
    or in part to a Year 2000 compliance problem, flood damage, dampness not
    arising from failure of a load-bearing portion of the building,
damage to
    drains or services
, damage to finishes, malicious damage or damage arising
    from acts of God, acts of the owners or their tenants, licensees or invitees,
    acts of civil or military authorities or acts of war, riot, insurrection or
    civil commotion; (vice de construction important)[Emphasis added.]

[101]

Newport submits
    that a sewer is a drain  both are conduits for carrying off water or sewage.  Any
    deficiencies in the sanitary sewer system therefore fall under the category of
    damage to drains and services, and are excluded from the types of major
    structural defects covered by the Act.  Thus, Newport submits, the sanitary
    sewer claim does not disclose a reasonable cause of action under r. 21.01(1)(b)
    of the
Rules of Civil Procedure
, and the motion judge erred by failing
    to strike it.

[102]

The motion judge
    rejected Newports submission at para. 65 of her reasons:

In my view however, damage to drains or services is not what is
    excluded from the definition, but rather it is any defect attributable in
    whole or in part to damage to drains or services that is excluded. Even if a
    sewer is a drain, and I am not persuaded it is, the Condominium Corporation is
    not claiming a defect attributable to damage to drains. It claims that the
    sanitary sewer did not function because it was not installed in accordance with
    the Ontario Building Code. Improper or illegal installation is not a defect
    attributable to damage to drains or services, nor is it damage to drains or
    services. This part of the motion is dismissed.

[103]

Newport contends
    that in this passage the motion judge misread the definition of a major
    structural defect by holding that the words any defect attributable in whole
    or in part to modifies damage to drains or services; instead, Newport argues
    that  damage to drains or services is just an excluded item.

[104]

Even accepting
    Newports contention, I agree with the motion judges decision not to dismiss
    this claim for breach of statutory warranty.  A court may strike out a claim
    under r. 21.01(1)(b) only if it is plain and obvious that the claim discloses
    no reasonable cause of action: see
Hunt v. Carey Canada Inc.,
[1990] 2
    S.C.R. 959.  Newport therefore has the burden of showing that it is plain and
    obvious the alleged deficiencies in the sanitary sewer system do not constitute
    a major structural defect.  It cannot meet this burden for at least three
    reasons.

[105]

First, Metro
    1352 has pleaded that the sewer system did not function because it was
    originally constructed in contravention of the approved permit plans and the Ontario
    Building Code.  The system was not damaged; it was improperly constructed or
    installed.  The motion judge summarized Metro 1352s claim at para. 56 of her
    reasons:

The Condominium Corporation alleges the following: that the
    developer defendants did not build the sanitary sewer system in accordance with
    the Ontario Building Code or the plans filed with the municipality pursuant to
    which the building permit was issued; that they concealed this fact from the
    purchasers; that a professional engineer responsible for the building project
    confirmed under his signature and professional seal that the system has been
    constructed in accordance with the Ontario Building Code and plans submitted to
    the municipality; and that the developer defendants gained an economic
    advantage by doing this.

[106]

Even if a sewer
    is a drain, it is far from plain and obvious that this claim falls within the
    exclusion for damage to drains or services in the definition of a major
    structural defect.

[107]

Second, it is
    not plain and obvious that a drain in s. 1 of Regulation 892 includes a
    sanitary sewer system.  Regulation 350/06 under the
Building Code Act
,
1992,
S.O. 1992, c. 23, differentiates between a drainage system, a
    sanitary sewer and a sewage system.  Under s. 1.4.1 of Regulation 350/06:

·

A drainage system means an assembly of pipes, fittings, fixtures
    and appurtenances on a property that is used to convey sewage and clear water
    waste to a main sewer or a private sewage disposal system, and includes a
    private sewer, but does not include subsoil drainage piping.

·

A sanitary sewer means a sewer that conducts sewage.

·

A sewage system includes a chemical, incinerating, recirculating
    or self-contained portable toilet; a greywater system; a cesspool...

[108]

These
    definitions seem to contemplate a difference between drains and sewer systems.  Indeed,
    if the exclusion to the definition of major structural defect in s. 1 of
    Regulation 892 was meant to exclude sewer systems, the Regulation could have
    said so expressly.

[109]

Third, the Act
    and Regulation 892 expressly allow for compensation out of the guarantee fund
    for damage in respect of a sewage disposal system.  Section 14(4) of the Act
    provides, subject to the Regulation, compensation to an owner who suffers
    damage because of a major structural defect in s. 13(1)(b).  Section 6(10) of
    the Regulation limits that compensation payable in respect of a sewage
    disposal system to $25,000 per home.

[110]

For these
    reasons, it is not plain and obvious that the defects in Metro 1352s sanitary
    sewer system are excluded from the definition of major structural defect.  Therefore
    I would not give effect to this ground of appeal.

Third Issue  Did
    the motion judge err by failing to dismiss the claim for
defects
in the EIFS on the ground that
the claim
was pleaded after the expiry of the limitation period?

[111]

Under s. 4 of
    the
Limitations Act 2002
, S.O. 2002, c. 24, Sch. B, a claim must be
    pleaded within two years of the date that it was discovered.  Metro 1352s
    original statement of claim did not expressly refer to defects or leaks in the
    EIFS.  Newport says that Metro 1352 discovered these alleged defects no later
    than January 2008.  Yet Metro 1352 claimed for EIFS defects for the first time
    in its amended statement of claim, which was issued in mid-July 2010  or more
    than two years after the claim was discovered.  Thus, Newport submits that the
    claim is barred by the expiry of the two-year limitation period.

[112]

The motion judge
    rejected Newports position for two reasons.  First, she held at para. 67 of
    her reasons that the EIFS claim was, in fact, pleaded in the original statement
    of claim, even if it was not expressly referred to:

In my view, this argument fails for two reasons. Firstly, this
    claim was pleaded in the Statement of Claim, which was issued on August 24,
    2006. Paragraphs 9 and 10 of the Statement of Claim refer to two documents that
    specifically raise the issue of water leaking into the townhouses. The
    Technical Audit Report dated November 26, 2001 and prepared by Halsall
    Associates Limited, cited in paragraph 9 of the Statement of Claim, refers to
    leaks through the doors of townhouses 11 and 22, leakage through the ceiling
    vent in the basement of townhouse 22 during heavy rain, and water pooling on
    all ground-floor patios of the townhouses. A further report prepared by Halsall
    on April 15, 2003, referred to in paragraph 10 of the Statement of Claim, lists
    leakage into townhouses 1, 12 and 23 through exterior walls/doors as an
    outstanding item to be addressed by Newport. The Amended Statement of Claim
    simply pleads additional facts that came to light after the delivery of the
    Statement of Claim that explain the cause of the leakage, and does not plead a
    new cause of action.

[113]

I agree with the
    motion judges reasons.

[114]

Second, in the
    alternative, the motion judge held that Newports motion was premature because
    it had not yet delivered a statement of defence, and a limitation defense, like
    any other defence, must be pleaded.  She wrote, at para. 68:

Secondly, if I am wrong in concluding that the EIFS claim was
    pleaded in the Statement of Claim issued on August 24, 2006, a motion to strike
    the EIFS claim on the basis of the expiration of the limitation period pursuant
    to rule 21.01(1)(a) is premature given that no statement of defence has been
    delivered:
Beardsley v. Ontario
, (2001), 57 O.R. (3d) 1 (C.A.). The
    Court of Appeal in
Beardsley
suggested that a claim could be struck
    pursuant to rule 21.01(1)(a) on the basis of the expiry of a limitation period
    prior to the delivery of a statement of defence if it was obvious from the
    statement of claim that, no additional facts could be asserted that would
    alter the conclusion that a limitation period had expired [para. 21]. However,
    as D. M. Brown J. notes in
Greatrek Trust S.A./Inc. v. Aurelian Resources
    Inc.
,
[2009] O.J. No. 611 (S.C.J.),

A court cannot gain a complete picture of the issues in a case
    without reading all the pleadings. To permit defendants to move to strike using
    yet-to-be-pleaded limitation defences would distort the pleadings process. Rule
    25.06 does not require plaintiffs to plead their claims anticipating defences
    which might be raised. Replies function to respond to pleaded defences.

[115]

I agree.  This
    courts decision in
Beardsley
affirmed, at paras. 21-22, that
    ordinarily limitation defences must be pleaded:

The motion to strike based on the expiry of a limitation period
    could only be made pursuant to Rule 21.01(1)(a), which provides that a party
    may move for the determination of a question of law 
raised by a pleading
.
    The expiry of a limitation period does not render a cause of action a nullity;
    rather, it is a defence and must be pleaded. Although we agree that it would be
    unduly technical to require delivery of a statement of defence in circumstances
    where it is plain and obvious from a review of a statement of claim that no
    additional facts could be asserted that would alter the conclusion that a
    limitation period had expired
, a plain reading of the
    rule requires that the limitation period be pleaded in all other cases.
    Plaintiffs would be deprived of the opportunity to place a complete factual
    context before the court if limitation defences were determined, on a routine
    basis, without being pleaded. Adherence to rules that ensure procedural
    fairness is an integral component of an appearance of justice. [Internal
    citations omitted.]

[116]

The rules call
    for a limitation defence to be pleaded in the statement of defence.  A
    plaintiff is entitled to reply to a statement of defence and put before the
    court further facts, for example, on the question of the discoverability of the
    claim.  Only in the rarest of cases  and this is not one of them  should this
    court entertain a defendants motion to strike a claim based on the limitation
    defence where the defendant has yet to deliver a statement of defence.  I would
    not give effect to this ground of appeal.

D.

conclusion

[117]

Newports appeal
    raises three questions:

(1)

Did the motion judge err by failing to dismiss Metro 1352s claims
    relating to defects in the sanitary system and the EIFS as an abuse of process?

(2)

Did the motion judge err by failing to dismiss the claim for breach of
    warranty for defects in the sanitary sewer system on the ground that they do
    not constitute a major structural defect under the Act?

(3)

Did the motion judge err by failing to dismiss the claim for defects in
    the EIFS on the ground that the claim was pleaded after the expiry of the
    limitation period?

I would answer no to all three questions.  I would
    therefore dismiss Newports appeal.

[118]

The parties may
    make brief written submissions on the costs of this appeal within ten days of
    the release of these reasons.

Released: Dec. 4, 2012                                John
    Laskin J.A.

JL                                                            I
    agree Warren Winkler C.J.O.

I
    agree David Watt J.A.


