ARBITRATION PURSUANT TO THE REGULATION RESPECTING THE GUARANTEE PLAN FOR NEW RESIDENTIAL BUILDINGS
(DECREE 841-98 of 17 June 1998)
CANADIAN COMMERCIAL ARBITRATION CENTER
(Arbitration Body accredited by the Régie du bâtiment du Québec)
________________________________________________________________
CANADA
PROVINCE DE QUÉBEC
DOSSIER NO: S10-020601-NP
CRYSTAL KACZKOWSKI
(THE « BENEFICIARY »)
Vs.
LES CONSTRUCTIONS ARSENAULT & FRÈRES INC.
(THE « CONTRACTOR»)
And
LA GARANTIE DES BATIMENTS RÉSIDENTIELS
NEUFS DE L’APCHQ INC.
(THE « MANAGER »)
________________________________________________________________
ARBITRAL AWARD
________________________________________________________________
Arbitrator: Me Roland-Yves Gagné
For the Beneficiary: Madam Crystal Kaczkowski
Mr. Andrew Bandish
For the Manager: Me François Laplante
Mr. Frédérick Garcia
For the Contractor: Mr. Robert Arsenault
Madam Lyne Guilbert
Date of Hearing: 23 August 2010
Date of the decision: 30 August 2010
Place of Hearing: Canadian Commercial Arbitration
Center
1010 ouest, de la Gauchetière, #950
Montréal, Qc. H3B 2N2
The Mandate
The Tribunal is seized of this case following the nomination of the undersigned on 4 June 2010, after a notice of arbitration filed by the Beneficiary under the Regulation respecting the guarantee plan for new residential buildings (c. B-1.1, r. 0.2, hereinafter referred to as the Regulation) was received by the Canadian Commercial Arbitration Center on 2 June 2010. There was no objection regarding the competency of the Tribunal and the jurisdiction of the Tribunal is confirmed.
The Claim
On 2 June 2010, the Beneficiary sent a notice of arbitration in order to contest the “administrative decision by Mr. Frederick Garcia (Manager) from the APCHQ (069579-1)”.
The Manager decided:
“Claim received by the Manager on January 29, 2010, in the fifth year of the guarantee: Cracked steps - front and back staircases”
[…]
“As mentioned at the beginning of this report, this item was claimed in writing to the Manager on January 29, 2010. It is clear that more than six (6) months went by between the Beneficiary’s discovery of the problem and the time when she presented her written claim to the Manager.
As for the time limit for presenting a claim, the guarantee contract stipulates that any faulty workmanship, hidden defects or major construction defects, as the case may be, must be declared in writing to both the contractor and the Manager within a reasonable time limit, not exceeding six (6) months, following their discovery or occurrence or, in the case of gradually worsening defects or problems, from the date the first signs of the defect or problem appeared.
Consequently, in this case, since the legally established time limit for presenting a claim has clearly been exceeded, the Manager must reject the Beneficiary’s claim on Item 1”
The History of the Case
The building is located at […] in Pincourt, QC.
The acceptance of the building by the Beneficiary was on 11 November 2005 (Exhibit A-2). Even if it was a show house, and the date of the end of the work was not brought as evidence at the hearing, the attorney for the Manager testified that he considered that the claim had been made in the 4th and 5th year of the guarantee.
By a letter dated 14 October 2009, the Beneficiary told the Contractor
“that significant cracks have formed in the front and back steps (see pictures enclosed). These look like a serious structural problem and must be repaired I believe that these are construction defects and should be corrected by you according to the home guaranty with Garantie Maisons Neuves, Building No. U-069579” (Exhibit A-3).
The claim was received by the Manager on 29 January 2010.
By an email dated 14 April 2010, the Beneficiary wrote to the Manager “the crack has been like that for about a year” (Exhibit A-5).
The Manager rendered his Decision on 11 May 2010.
The notice of arbitration was received by the Canadian Commercial Arbitration Centre on 2 June 2010.
The exhibits of the Manager were identified as A-1 et seq., in accordance with the sub-sections of his “Cahier des Pièces”, filed by mutual consent of the parties. The exhibits of the Beneficiary, a set of pictures, were identified as B-1 followed by a letter, from A to O. The Beneficiary and the Manager testified in English.
Representations of the parties
Beneficiary
The Beneficiary represented that the Manager’s decision was rendered on facts that needed to be clarified.
The Beneficiary has lived on her own with her dog since August 2007, after the other person who had bought the property with her, Mr. Andrew Bandish, had moved out. She does not use the back yard, she never sits there, and there is no shade.
She noticed the crack in the back steps for the first time in April 2009 when she opened the back door to let her dog out. She cannot really say when “the tiny thing” started. When she first noticed the crack in April 2009, she thought it was a benign crack, she did not know it would need her attention.
She did not know it was a problem until a real estate agent came in August 2009 (Mr. Andrew Bandish adding that the real estate agent came because she wanted to sell the house). The real estate agent told her that she had a crack in the back steps, and that she should file a claim for it. She had not noticed that the crack was that big until the real estate told her. The crack in April 2009 was smaller.
She did not know it was covered by her guarantee plan before August 2009 and she asked Mr. Bandish to take the pictures in October 2009. These pictures were filed as B-1 A to J. Other pictures, taken in July 2010, were filed as B-1 K to O. Until October 2009, when the picture of the crack in the back steps was taken, it was not cracked all the way through.
Finally, the email dated 14 April 2010 referred to the time when she saw the crack at the back steps about a year before, not when she saw the crack in the front steps for which she also have a claim. She did not consider the crack in the back step to be a problem when it was small - it was only when the real estate agent came in August 2009, that she realised that it was a problem.
In October 2009, Mr. Bandish took also pictures of the front steps, and the Beneficiary testified that it was the first time that she had seen the crack of the front steps, after Mr. Bandish had pointed out that crack.
Mr. Bander testified that he does not live in the building since August 2007. At that time, he did not see any crack.
Manager
The Representative of the Manager said he visited the building in April 2010 in the absence of the Beneficiary, who was away. A friendly neighbour, Ms. Wendy Comps (phonetically written), assisted him. He had questions for the Beneficiary, so the questions were given to Ms. Comps who told him she would forward them to the Beneficiary. The Manager asked the Beneficiary if the stairs had moved during seasonal changes, and the Beneficiary replied in her email dated 14 April 2010 (Exhibit A-5) that there seemed to be no movement,
There is no change with seasons, but the back steps crack seems to be getting bigger,
therefore, the Manager concluded that the stairs had been cracked for a while.
He had to know when the Beneficiary had found out about the cracks, and the Beneficiary replied in her email
The crack has been like that for about a year.
The Manager stated that, according to his experience, the cracks were there for a while. He said that cracks start very small, they expand with the frost. As the cracks are at least 4 to 5 millimetres, which is “quite big”, “it is a crack that it is there for at least a year”.
He based his decision on the Beneficiary’s statement that she had noticed the crack a year ago.
His opinion is, if the question of the 6-month time limit were not an issue, the back step crack would probably be covered by the Guarantee Plan. He was more affirmative for the front step crack. His opinion is that it is not covered; the crack is only an esthetical problem, caused by the “retrait” (drying shrinkage) of the material. No guarantee plan covers the normal wear and tear of a house and no guarantee plan can assure a Beneficiary that there would be no crack.
The Tribunal adds at this point that this opinion was given in the conditional tense; there was no offer, agreement or decision made during the hearing.
While he was not present when the house had been built, the Manager did not see anything wrong with the way it had been built by the contractor, it met the residential standard.
Contractor
Madam Lyne Guilbert stated that the house was built in according to the state of the art. It snowed enormously during the two last winters (2007-2008 and 2008-2009), which demanded a lot of maintenance (snow removal).
If there had been a drying shrinkage (“retrait”), this would have happened long time before, so the cracks had been caused by the negligence of the beneficiary who did not remove the snow properly from her balcony and stairs. The Beneficiary replied that she still had a dog; she had to remove the snow because the dog cannot jump in the snow to go outside in the back.
Arguments
For the Beneficiary, a crack is a “progressive entity” - it started small, it got worst, until she discovered she had a problem in August 2009 when the real estate agent pointed out that she had a problem (the crack was then bigger), and when Mr. Bandish came to take the pictures in October 2009. When the crack at the back steps was small, she did not think to file a claim, now it looks like it will fall apart.
For the Manager’s attorney, there is no proof in the file of the date of the end of work. The Manager considered the claim to have occurred in the 4th and 5th year of the guarantee plan. The Manager’s decision was based on the information that he was able to collect from the Beneficiary in her email dated on 14 April 2010. That email said the crack was like that for about a year, and the only conclusion that the Manager could have reached was that it had been discovered in April 2009, and that the claim was filed after the 6-month time limit.
Moreover, the Manager testified that the cracks on the pictures filed as Exhibits B-1 M, K, D and E had been there for a while, at least a year, they did not happen overnight.
The Manager’s attorney filed the decision of Moustaine vs. Brunelle Entrepreneur and Garantie des bâtiments résidentiels neufs de l’APCHQ, rendered by Me Jean-Philippe Ewart on 9 May 2008, in which the arbitrator states that the 6 month time limit cannot be extended, as it is a period of extinction of right (délai de déchéance) :
[36] En résumé, la dénonciation prévue à l’article 10 du Règlement se doit d’être par écrit, est impérative et essentielle, le délai de six mois prévu au même article emporte et est un délai de déchéance, et si ce délai n’est pas respecté, le droit des Bénéficiaires à la couverture du plan de garantie visé et à le [sic!] droit à l’arbitrage qui peut en découler sont respectivement éteints, forclos et ne peuvent être exercés.
For the contractor, the erection of the building respected the state of the art. The Beneficiary had to respect the 6-month time limit to file her claim, which she did not do.
Analysis and Decision
Section 10 of the Regulation says:
10. The guarantee of a plan, where the contractor fails to perform his legal or contractual obligations after acceptance of the building, shall cover […]
(3) repairs to non-apparent poor workmanship existing at the time of acceptance or discovered within 1 year after acceptance as provided for in articles 2113 and 2120 of the Civil Code of Québec, and notice of which is given to the contractor and to the manager in writing within a reasonable time not to exceed 6 months following the discovery of the poor workmanship;
(4) repairs to latent defects within the meaning of article 1726 or 2103 of the Civil Code of Québec which are discovered within 3 years following acceptance of the building, and notice of which is given to the contractor and to the manager in writing within a reasonable time not to exceed 6 months following the discovery of the latent defects within the meaning of article 1739 of the Civil Code of Québec; and
(5) repairs to faulty design, construction or production of the work, or the unfavourable nature of the ground within the meaning of article 2118 of the Civil Code of Québec, which appears within 5 years following the end of the work, and notice of which is given to the contractor and to the manager in writing within a reasonable time not to exceed 6 months after the discovery or occurrence of the defect or, in the case of gradual defects or vices, after their first manifestation (our underlined).
The Manager rejected the claim because he considered that it had been filed after the period of 6 months of the discovery. The Tribunal concurs with the decision of Me Jean-Philippe Ewart in Moustaine: the time limit of 6 months is a period of extinction of right that cannot be extended.
As the claim was filed after “3 years following acceptance of the building”, the only possible coverage, is in paragraph 5 of section 10 of the Regulation, if this Tribunal considers only the question of delay, as he is asked to do, that is, if the claim was filed within
“6 months after the discovery or occurrence of the defect or, in the case of gradual defects or vices, after their first manifestation”
In this case, cracks have been a gradual defect or vice. The Tribunal has to decide where to fix “the first manifestation” of the defect or vice, in accordance with Section 10(5) of the Regulation, under reserve of the applicability of Section 10(5) of the Regulation to the merit of her claim.
Front Steps
In her claim filed with the Manager on 29 January 2010, the Beneficiary wrote that “significant cracks have formed in the front and back steps”.
During the hearing, the Beneficiary said that she discovered the presence of the crack in the front steps in October 2009 only, when Mr. Andrew Brandish took the pictures of it. She testified that her comment in the email dated 14 April 2010 referred only to the crack in the back steps.
Under reserve of the applicability of Section 10(5) of the Regulation to the merit of the claim, the Tribunal concludes that the claim concerning the crack located in the front steps, visible on pictures B-1 F, G, H, I and J, was discovered in October 2009 and that the claim concerning that crack in the front steps, filed on 29 January 2010, was filed within the delay of six months, in accordance with Section 10(5) of the Regulation.
Back Steps
The Beneficiary stated that she noticed there had been a crack in April 2009, but it was subtle, a tiny thing. She discovered the seriousness of the crack in August 2009 only, when the real estate agent told her that she had a problem, and the crack was then wider than in April.
On the other hand, the Manager considers that this crack did not happen overnight, and that it, necessarily, should have been this “seriousness” (4 - 5 millimetres) for a least a year.
The Beneficiary also stated that because of her dog, she had to remove the snow of her back balcony or patio, so her dog could go outside. She said that it was when she opened the back door to let her dog out in April 2009 that she saw for the first time a crack, referred to as a “tiny thing”.
From the evidence, the Tribunal concludes that
- the crack did not open and become “a serious problem” only the night before the real estate agent made his visit of the building in August 2009, it was in that state before his visit, but it is impossible for this Tribunal to determine when;
- the Beneficiary continued during the period between April and August 2009 to open her back door occasionally, and did not pay attention to the crack until the real estate agent told her in August 2009 that she had a problem and that she should file a claim about it.
The Beneficiary, who is a layperson, who hired experts to build her house, cannot be blamed for not knowing, at the sight of a benign, subtle or tiny crack, that there would be a defect within the meaning of Section 2118 of the Civil Code, to which Section 10(5) of the Regulation refers precisely.
Faced with major defects, within the meaning of the former Section 1688 - current Section 2118 - that occurred gradually, but in a completely different context - the time limit to institute proceedings in civil courts against a contractor, within the meaning of a former Section 2259 (current Section 2926), Mr. Justice Beetz of the Supreme Court in Desgagné c. Fabrique de la paroisse St-Philippe d’Arvida, [1984] 1 R.C.S. 19, wrote the following opinion:
Si le
fardeau est lourd pour le tribunal, qui est le plus souvent assisté d’experts
appelés par toutes les parties ou désignés d’office et qui a l’avantage unique
de prendre connaissance, des mois et même des années après qu’elles se sont
produites, des circonstances qui ont donné naissance au litige et de leur
évolution, ce fardeau est, dans la majorité des cas, insupportable pour le
propriétaire qui ne connaît encore ni le déroulement ni la conclusion des
événements. Ce propriétaire est un profane. Il a engagé des experts ou
professionnels de la construction auxquels il fait confiance […]
Even if it was rendered in a different context and based on a different provision of the law, this Tribunal concurs with this opinion of the Supreme Court of Canada in a case of gradual defects or vices in the context of Section 10(5) of the Regulation, and the case before this Tribunal .
The Court of Appeal of Quebec in DSD International inc. c. Construction Gosselin-Tremblay inc. (2008 QCCA 2533) interpreted in 2008, Section 2926 of the Civil Code - a different factual context and a different provision of the law, than the one before us - as follows (2926 - Lorsque le droit d'action résulte d'un préjudice moral, corporel ou matériel qui se manifeste graduellement ou tardivement, le délai court à compter du jour où il se manifeste pour la première fois):
[10] Lorsque la faute et le dommage n'apparaissent pas en même temps, l'article 2926 C.c.Q. précité indique que la prescription commence à courir à compter du moment où il se manifeste pour la première fois.
[11] Selon la doctrine et la jurisprudence, cette expression réfère au premier signe appréciable ou tangible de la réalisation du préjudice.
The interpretation of Section 10(5) of the Regulation, clearly established by Arbitration Tribunals in numerous recent cases, is in conformity with the opinions of the Higher Courts based on other provisions of the law concerning gradual prejudice.
As Arbitrator Me Jeffrey Edward wrote in Johanne Giguère et Bruno Doyon et Gestions La Casa inc. et La Garantie Qualité Habitation, SA, 15 March 2006:
[...] en cas de manifestation graduelle du vice, la découverte a lieu lorsque l’acheteur a pu raisonnablement en soupçonner « la gravité et l’étendue ».
The undersigned Arbitrator concurs with this interpretation of Section 10(5) of the Regulation.
The evidence clearly demonstrates that the Beneficiary, who lives on her own and who is a “layperson” without any expertise, has been faced with a problem (to be properly assessed by the Manager), that has appeared gradually and progressively, that she suspected the seriousness and extent of the defect (soupçonner « la gravité et l’étendue ») when she was told by a real estate agent in August 2009 that the crack was the sign of a problem:
“it started off small, I considered it was not a thing that needed to be addressed” […] “I did not know it was a problem to the back step until last year when the real estate came over and said last Summer oh you have a crack you should file a claim for that, I did not know it was covered for my guarantee”
Under reserve of the applicability of Section 10(5) of the Regulation to the merit of the claim, the Tribunal concludes that the claim concerning the crack located in the back steps, visible on the pictures B-1 A, B, C, D, E, K, L, M, N, O originated from what the Beneficiary learned in August 2009 from a real estate agent, who told her that this crack was a serious problem for which she should file a claim, and that the claim concerning that crack on the back steps, filed on 29 January 2010 was filed within the delay of six months, in accordance with Section 10 (5) of the Regulation.
Arbitration fees
The Manager based his decision of 11 May 2010 on an email written by the Beneficiary dated 14 April 2010. The Beneficiary admitted that she had written the email in a rush - “it was a quick email” - while she was away. She said that she had not really taken care of the words she had been using in her email. By doing so, the Beneficiary obliged the Manager, and the Contractor, to attend this arbitration hearing so she could clarify what she meant in her email.
In order to determine who has to support the arbitration costs, the Tribunal has to apply Section 21 of the Regulation: considering that the Beneficiary obtained a favourable decision on her claim, the Tribunal orders that the arbitration fees be fully charged to the Manager.
FOR THESE REASONS, THE ARBITRATION TRIBUNAL:
DECLARES, under reserve of the applicability of Section 10(5) of the Regulation respecting the guarantee plan for new residential buildings to the merit of her claim to be determined by the Manager, that the claim of the Beneficiary filed on 29 January 2010 was filed within the 6 month time limit set in Section 10(5) of the Regulation;
RETURNS the file to the Manager for the issuance by him of a new decision concerning the claim of the Beneficiary filed on 29 January 2010, based on the merit of the file, within a period of 60 days;
ORDERS that the Manager to pay full costs of the arbitration.
Montreal, 30 August 2010
___________________
Me Roland-Yves Gagné
Arbitrator