Court of Appeal overturns summary judgment, allows historical contamination claim to proceed

D Corp. owned a property that was used as a gas station until 2004.  C Ltd. purchased a nearby property on April 10, 2012 and, on April 28, 2014, commenced an action against D Corp. and the former owners of D Corp.'s property for damages resulting from hydrocarbon contamination.  The contamination was alleged to have migrated from D Corp.'s property to C Ltd.'s property.

After the exchange of pleadings (the Statement of Claim and Statements of Defence by the parties), the Defendants moved for summary judgment to dismiss C Ltd.'s claim on the basis that the applicable limitation period had expired.  They asserted that C Ltd.'s claim had been discovered more than 2 years prior to the commencement of its action.  The judge hearing the motion granted the dismissal, finding that C Ltd. had become aware of sufficient material facts by March 9, 2012.  Alternatively, the motion judge held that C Ltd. had a sufficient basis for an action by March 30, 2012 when soil and groundwater sampling results were made available to C Ltd.  In the further alternative, the motion judge found that, even if C Ltd. did not know about drilling results showing contamination until May, 2012 (i.e. within 2 years of the commencement of the action), C Ltd. should have known of its claim but did not exercise due diligence.

Also, the motion judge rejected C Ltd.'s suggestion that there was a continuing tort that suspended the operation of the limitation period.  The judge saw no evidence that there was ongoing damage or nuisance.  Where there is such ongoing damage or nuisance, the limitation period will not act to bar a claim entirely since the tort (the wrong being done by the party causing the contamination) is ongoing.  The limitation period might still act, though, to limit how far back the claimant's damages claim can extend (i.e. the damages might still be limited to those sustained no more than 2 years before the commencement of the action).

The Court of Appeal reversed the dismissal of the action.  It found that the motion judge was wrong to find that C Ltd. knew or ought to have known of its claim for contamination damages more than 2 years prior to commencing the action.  First, C Ltd.'s knowledge of potential contamination or its suspicion (based on a Phase I ESA) should not have been equated with actual knowledge that its property was contaminated.  Second, the Court of Appeal found that the motion judge improperly ignored relevant circumstances surrounding C Ltd.'s purchase of its property (which was part of a multi-property purchase involving 22 properties).  The Court found that once C Ltd. had waived its conditions on the purchase, it was not reasonable to expect C Ltd. to have sought out information about potential contamination (the test results it obtained in May, 2012); by that point, C Ltd. was bound to complete the purchase of the property.

In making its decision, the Court of Appeal did not rule on C Ltd.'s continuing tort argument.

Read the decision at: Crombie Property Holdings Limited v. McColl-Frontenac Inc. (Texaco Canada Limited).