Legal File: What You Don’t Know…

Owners of contaminated property in Ontario can successfully recover damages from neighbouring polluters, even if the owners do not intend to clean up the contamination. Courts may order damages based on the costs of clean-up to a “pristine” state, a higher standard than required by the Ministry of the Environment clean-up guidelines. The stringent “pristine” standard may be invoked even where the current land use is commercial or industrial. On November 21, 2002 the Supreme Court of Canada refused leave to appeal from the Ontario Court of Appeal’s decision in Tridan v. Shell.

Implications of the Tridan decision

Owners do not have to sell or clean up to successfully sue for damages.

Damages for diminished property value will be based on the best evidence available to the Courts – including estimated cost to clean up and/or appraisal evidence of loss of value. The quality of expert appraisal evidence will be a critical factor.

Owners may also recover related financing and business disturbance losses.

In this case the court accepted evidence that the property value may be reduced by stigma even after the property is cleaned up to MOE standards; the court found that there was no evidence of stigma after clean-up to ‘pristine’ condition.

Prejudgment interest was not awarded on economic loss for diminution of property value. (The Court of Appeal overturned an interest award of $442,000).

Concerns

If the property is not cleaned up, can the polluter avoid paying damages in a future lawsuit for the same contamination, brought by a future owner?

Will this decision undermine the regulated clean-up standards coming soon under Ontario’s new Brownfields legislation?

In Tridan the property owner was awarded damages for diminution of property value for petroleum products spilled at a next-door Shell gas station. Although the contamination migrated to the Tridan property, the contamination did not interfere with the business of the successful car dealership on the site. Despite the fact the owner did not intend to sell the property or clean it up, the Court of Appeal awarded damages for diminution of the value of the property due to the contamination in an amount equal to the projected cost of clean-up.

Based on the evidence of appraisers, the Court found that if the property was cleaned up to MOE guideline standards, the property value would still be diminished by the stigma of contamination left on site. In order to compensate the owner, the Court considered whether to award a percentage of property value to compensate for the stigma, or to award the owner the cost of clean-up to “pristine.” The Court settled on the lower of the two, and awarded the cost to clean up all of the contamination that came from Shell. The property could then be sold for full value.

Marc McAree and Barry N. Spiegel are environmental lawyers at Willms & Shier Environmental Lawyers – www.willmsshier.com. You can reach Marc at 416-862-4820 and mmcaree@willmsshier.com, or Barry at 416-862-4837 and bspiegel@willmsshier.com.