Recent Developments in Contaminated Sites Case LawJanet BobechkoSenior Partner, Certified Specialist (Environmental Law)Norton Rose Fulbright Canada LLPJune 7, 2017

What’s the point?• Provide an overview of important implications of recent and

leading environmental cases in Ontario

• Case to be discussed:– Midwest Properties Ltd v Thordarson et al , 2015 ONCA 819– Dobara Properties v Arnone , 2016 ONSC 3599– Huang v Fraser Hillary’s Ltd , 2017 ONSC 1500– Crombie Property Holdings Ltd v McColl-Frontenac In c, 2017 ONCA 16– Sorbam Investments Ltd v Litwack , 2017 ONSC 706

• Important implications arising from these cases include:– Potential applicability of limitation periods– Trends in damages– Special considerations for landlord liability

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Midwest Properties v Thordarson (2015 ONCA)

The Facts:

• In 2007, Midwest acquired property in an industrial area of Toronto

• Midwest became interested in purchasing an adjoining property owned by Thorco Contracting Limited (which was controlled by Mr. Thordarson)

• After learning of contamination on Thorco’s property, Midwest discovered that its own property was contaminated

• Thorco and Mr. Thordarson failed to comply with a ministry order requiring them to remediate the contamination on Midwest’s property

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Midwest Properties v Thordarson (2015 ONCA)

Court of Appeal for Ontario: Thorco and Mr. Thordarson Liable

• No limitation period for environmental claims that are undiscovered and no requirement for a claimant to establish that the property was clean before it bought the property

• Midwest entitled to compensation for the reasonable costs of remediating its property to contamination levels wi thin MOE standards

• Mr. Thordarson was also held personally liable under EPA s. 99(2)– EPA s. 99(2) establishes a right of compensation from “the person

having control of the pollutant”– EPA s. 91(1) defines “the person having control of the pollutant” as

“the person and the person’s employee or agent, if any, having the charge, management or control of a pollutant immediately before the first discharge of the pollutant

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Dobara Properties v Arnone (2016 ONSC)

The Facts:

• Dobara Properties purchased a strip mall in 2004• In 2010, an environmental study indicated that the parking lot,

located on a former gas station, was contaminated• By mid-2011, plaintiffs had incurred ~$56K in remediation costs• Lawsuit 1 – Against legal counsel for 2004 purchase (Arnone)

– Dismissed for missing a limitation period• Lawsuit 2 – Against legal counsel in Lawsuit 1 (Hicks)

Ontario Superior Court of Justice: Hicks Liable

• Plaintiffs awarded remediation costs of $57,712– Cited Midwest Properties for the proposition that the “Trend is for the

courts to award damages for environmental remediati on costs rather than damages for diminution in property valu e”

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Huang v Fraser Hillary’s Limited (2017 ONSC)

• Fraser Hillary’s Limited (FHL) operated a dry-cleaning business• Plaintiff purchased property adjacent to FHL’s property and

discovered that it had been contaminated• Contamination had occurred 10 years before the plaintiff

purchased the property, prior to the enactment of section 99(2) of the EPA (in 1985)

Ontario Superior Court of Justice: FHL (Company) Liable

• Plaintiffs can rely on EPA s. 99(2) to claim damage s for spills which occurred before 1985 (when the section was en acted)–S. 99(2) applies prospectively – it covers future claims for prior events

• Dismissed personal liability of the director of FHL on the basis that he did not have control of the contaminant

• FHL (company) also liable in nuisance:–Damage/interference was substantial and nontrivial– Interference with use or enjoyment was unreasonable

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Crombie v McColl-Frontenac (2017 ONCA)

• In April 2012, Crombie purchased a property in Grimsby, ON• On April 28, 2014 Crombie sued for damages resulting from

hydrocarbon contamination originating from an adjacent property that served as a gas station until 2004

• Motion judge dismissed the action as time-barred• Limitation period began when Crombie conducted a Phase I ESA

Court of Appeal for Ontario: Action not time-barred

• Limitation period begins when:– the plaintiff is actually aware of the facts sufficient to bring a claim; or– when a reasonable prospective plaintiff ought to have known of

material facts necessary to make a claim• Crombie was not actually aware until it was given a draft Phase II ESA

– Phase I ESA was only evidence of potential contamination

Note: The Supreme Court of Canada recently refused leave to appeal.

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Sorbam Investments v Litwack (2017 ONSC)

• Defendant landlord had leased property for use as a dry-cleaning operation but had sold the property in 2007

• In 2010, the plaintiff discovered that its abutting property had become contaminated by dry-cleaning chemicals

Ontario Superior Court of Justice: Landlord not liable

• No knowledge that their dry cleaning business tenant might be emitting pollutants and the lease did not consider this

• Acted reasonably when they learned of the contamination• Neither owned nor controlled any contaminant immediately before its first

discharge• No evidence of a “spill” as defined in section 91(1) of the EPA, so section

99(2) did not apply• Rarely will a landlord be responsible for tenant contamination:

– Test is whether it was foreseeable that the nuisance would occur as an inherent part of the activity to be undertaken

– Canadian Tire v Huron Concrete (2014 ONSC) – Geographic proximity of a landowner’s property may be sufficient to ground a duty of care to the owner of that abutting property

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Concluding Comments• Prospective purchasers of property need to be diligent in determining

whether the property is contaminated, as there may be a limitations period that applies to preclude recovery

– The limitations period for a claim starts running w hen:• the plaintiff is actually aware (i.e. has actual knowledge) of the facts

sufficient to bring a claim; OR• a reasonable prospective plaintiff ought to have known of material

facts necessary to make a claim

– Suspicion of certain facts, or knowledge of a potential claim (including of potential risks disclosed in a Phase I ESA or in historical environmental reports) may trigger a duty of further inquiry and a due diligence obligation

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Concluding Comments• Damages under the EPA should be measured by the costs of restoring

the property to contamination levels within MOE standards (i.e., remediation costs)

– No requirement for the money to be spent on actual remediation

• Claims should still be made in nuisance, negligence , trespass, and strict liability, but recent jurisprudential interp retation of s. 99(2) makes s. 99(2) claims potentially advantageous:

– Allows plaintiffs to seek damages from a wider range of defendants

– Possibility of more significant and easier to prove damages

• Landlords are rarely held liable for the negligence of their tenants , however, Canadian Tire provides a potential precedent for the notion that geographic proximity will ground a duty of care

• Case law in Ontario for contamination continues to evolve; it is important to assess all aspects of a potential claim

Key Takeaway: Be wary of limitation periods - 2 year s goes by quickly

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THANK YOU!

Janet L. Bobechko, B.A., LL.B., J.D., CSCertified Specialist (Environmental Law)

Senior Partner Norton Rose Fulbright

Direct Tel. 416.216. 1886Direct Fax: 416.216.3930

Email: Janet.Bobechko@nortonrosefulbright.com

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