Court dismisses UST contamination claim where previous owners plead ignorance

The Ontario Superior Court of Justice granted summary judgment to the Defendants in a property contamination claim.  The Plaintiff in the case purchased a property and then discovered significant environmental contamination that it was forced to remediate.  The Defendants said they knew nothing of the contamination. 

The property deal was completed in June, 2001.  Over two years later, in September, 2003, the Ministry of the Environment (MOE) received a drinking water complaint about wells located near the property.  It was determined that gasoline had leaked from underground storage tanks (USTs) on the property, and the Plaintiff was ordered by the MOE to remediate the property at significant cost.

The Defendants denied any knowledge that the property contained USTs, and denied the existence of any facts from which they ought reasonably to have understood there to be USTs.  They also denied the existence of any environmental contamination of the property during their period of ownership (1991 to 2001).

This was a motion for summary judgment in which the Plaintiffs had to demonstrate that there were genuine issues requiring a trial - otherwise the action would be dismissed on a summary basis without a trial.  The Plaintiff suggested that there were a number of issues requiring trial: 1) whether the property was in compliance with all laws at the time it was sold (as required by the terms of the Agreement of Purchase and Sale); 2) the state of the Defendants' knowledge about the USTs and any leaks; 3) the strict liability regime imposed by Section 99 of the Environmental Protection Act; and, 4) the effect of spoliation of evidence, given that the Defendants had destroyed business records.

The Court considered these issues and concluded: 1) there is no evidence that the property was not in compliance with environmental laws at the date of sale - there was no evidence to show that the contamination pre-dated the sale of the property (no expert report was provided); 2) there was virtually no evidence on which a finding could be made that the Defendants knew about the USTs when the property was sold; 3) Section 99 of the EPA could not be relied upon since there was evidence to show, even on a balance of probabilities, that the Defendants had ownership or control of the pollutant immediately before the first discharge (which is a prerequisite to liability under that section of the Act); and, 4) the Plaintiff failed to satisfy the Court that the business records destroyed would be of relevance to the claim.

Read the decision at: Gagnon & Associates Inc. v. Genier et. al.

Court awards $3.6 million for contamination clean-up and $1.115 million for out-of-pocket costs

The Ontario Superior Court of Justice has awarded a property owner $3.6 million to clean-up petroleum hydrocarbon contamination from a neighbouring property, along with more than $1.115 million to cover out-of-pocket costs already expended in connection with the contamination.  Following a 12-day trial in Goderich and London, Justice Lynne Leitch found that underground storage tanks (USTs) at a concrete supply company's property were the source of contamination that had migrated onto a neighbouring commercial property.  She ruled that the defendant landowner was responsible to return the neighbouring landowner to the position it was in prior to the wrong committed.

The plaintiff landowner advanced its claims on the basis of the doctrine in Rylands v. Fletcher/Strict Liability, Nuisance, Negligence and Trespass.  The plaintiff's property was vacant until 1997 when a retail store operation was constructed there, and the evidence was that there had been no other use of the property prior to 1997.  The defendant's property was used for the production and sale of ready-mix concrete product, and the defendant also operated a fuel outlet on the property from the 1950s until 2012.  Original USTs were removed in 1989 and replaced by new USTs.   Justice Leitch noted, "It is fair to say that [the Defendant] used gasoline for many years with questionable UST system monitoring and maintenance practices and poor record keeping."

In 2007, the plaintiff landowner planned to build its own gas bar as part of its retail operation, and investigated the proposed site.  It was then that petroleum hydrocarbon contamination was detected.  From that point forward, the plaintiff undertook interim remediation steps and eventually commenced its action against the defendant landowner to recover the costs of the clean-up of its property.

Expert evidence was called by both parties, with the defendant's expert focusing on an opinion that the source of the contamination was, in fact, the plaintiff's property.  However, there was no evidence of soil contamination in the area where the defendant's expert postulated that a spill had occurred.  Considering all of the evidence, Justice Leitch concluded that the contamination came from the defendant's property: "There is no question that until 1989 leaded gasoline was stored on the "Defendant" Property in single-walled steel tanks, which were susceptible to corrosion and did not have a leak detection system."  She found the defendant liable on the basis of strict liability, nuisance, negligence and trespass.

What I find to be most interesting about the decision is the issue of damages.  Justice Leitch agreed with the plaintiff that it should be awarded $3.6 million, which is the estimated cost of remediation, including soil and groundwater remediation.  In addition, she awarded out-of pocket costs already incurred, bringing the total damages award up to about $4.8 million.  However, I was not able to see any reference in the decision to the actual value of the Plaintiff's property.  Although the Plaintiff did include a claim for loss of property value in its lawsuit, it did not pursue that claim at trial.  In reading the decision, I was expecting to see a discussion of the cost of the proposed remediation in relation to the value of the property as part of an analysis of the reasonableness of the damages award.  Perhaps the value of the property (including the retail operation) was so much greater than the cost of remediation that it was simply taken for granted that the cost of remediation was reasonable.

Read the decision at: Canadian Tire Real Estate Ltd. v. Huron Concrete Supply Ltd.