In Albert Bloom Limited v London Transit Commission (Bloom), the Ontario Court of Appeal upheld an Ontario Superior Court of Justice decision dismissing a property owner's claim against a prior owner for alleged environmental contamination. The current owner's claim was dismissed because it failed to commence its third-party claim against the prior owner within the applicable limitation period. 1
This update considers two important aspects of that decision for property owners and potential purchasers.
First, the Court of Appeal rejected the appellant's argument that pursuant to Crombie v McColl-Frontenac (Crombie), a party cannot have actual knowledge of a claim for environmental contamination until subsurface testing has been carried out on its property. The court held that this was a misreading of Crombie, which instead stands for the proposition that determining when a claimant has actual knowledge of a claim for the purposes of s. 5(1)(a) of the Limitations Act is case specific and depends on "the totality of factual circumstances." 2
Second, the Court of Appeal rejected the argument that the doctrine of continuing tort permitted the current owner to maintain a claim against the prior owner for alleged ongoing damage to neighbouring properties. The court clarified the limits of continuing tort in relation to contamination claims and emphasized that for a claim to be "continuing," the legal injury itself must continue, not merely the ill effect of the prior legal injury.
In 2011, Albert Bloom Limited, a property owner in a semi-industrial area of London, Ontario, informed its neighbour, Ramsden Industries Limited, that it had discovered trichloroethylene (TCE) contamination on its property. Ramsden investigated its properties and found they too were contaminated with TCE. Ramsden's environmental consultant concluded that a property to the east, owned by the London Transit Commission (LTC), was a potential source of the contamination. Specifically, Ramsden's consultant found that groundwater flow moved in a westerly direction and LTC's property was owned by an auto parts manufacturer (the prior owner) between 1949 and 1973, when TCE use was common in the industry.
In 2012, Albert Bloom advised LTC of the contamination and provided LTC with various environmental reports, some identifying the prior owner's manufacturing operations as a potential source of the contamination. Over the next two years, Albert Bloom repeatedly asked LTC to investigate its property, but LTC refused. Albert Bloom commenced a lawsuit against LTC and others in April 2013. And in January 2014, LTC served a defence, crossclaim and counterclaim denying responsibility and stating, in the alternative, that any contamination on its property was caused by a prior owner. But it was not until late 2014 that LTC finally tested its property and confirmed the presence of TCE contamination.
In March 2016, LTC commenced a third-party claim against the prior owner, alleging that it had contaminated LTC's property. The prior owner brought a motion for summary judgment, asserting LTC's third-party claim was statute barred by the Limitations Act, 2002. 3 The motion judge granted summary judgment, and dismissed the third-party claim, finding that LTC had discovered the third-party claim by at least May 22, 2013, when it was served with Albert Bloom's statement of claim in the main action.
LTC appealed, arguing that, among other things, the motion judge had erred by (1) finding that LTC had actual knowledge of its claim in the absence of subsurface testing of its property, and (2) finding that the doctrine of continuing tort did not apply.
With respect to actual knowledge, LTC argued the motion judge erred by equating knowledge that its property was a potential source of contamination with the knowledge that it was the source of contamination. LTC argued that Crombie established a general rule that actual knowledge of contamination does not arise in environmental claims until subsurface testing has been carried out, which did not happen in this case until late 2014.
The Court of Appeal rejected this argument, holding that Crombie was distinguishable on its facts. The court also emphasized that determining actual knowledge in environmental cases is a fact-specific exercise and there is no general rule or bright-line test.
In this case, by May 22, 2013, LTC had received six environmental reports from three consultants, all identifying its property as a potential source of contamination. The prior owner's historical manufacturing operations, which LTC knew about, were specifically referenced as a concern in four reports. The reports also indicated that the groundwater flowed in a westerly direction. Moreover, LTC's statement of defence in the main action had expressly pleaded (in the alternative) that any alleged contamination on its property had been caused by a previous owner. In these circumstances, the court held that subsurface testing was not necessary for LTC to have actual knowledge of a claim against the prior owner.
LTC also argued the motion judge erred in finding that it "ought to have known" of the claim against the prior owner by May 22, 2013, and that it failed to act with reasonable diligence in the circumstances. LTC did not dispute that it had a due diligence obligation to investigate its potential claim against the prior owner. However, LTC did argue that its due diligence obligation was met by retaining qualified legal counsel and environmental consultants, notwithstanding the content of the advice given to LTC.
In rejecting this argument, the Court of Appeal clarified that the due diligence obligation prescribed by s. 5(1)(b) of the Limitations Act "...imposes a heavier burden than simply hiring professional advisors." Further, the court explained that evidence of the information and advice exchanged with the environmental consultant must be assessed to determine if the potential claimant's actions were reasonable in the circumstances.
Finally, among various other arguments, LTC asserted that because Albert Bloom was claiming it continued to suffer damage through ongoing contaminant migration from LTC's property, LTC's claim against the prior owner was not out of time because it was indirectly "based on" a continuing tort.
The court held that this mischaracterized the third-party claim. Even if contaminants continued to migrate from LTC's property to its neighbour's property such that LTC might be committing a continuing tort relative to its neighbour, that would not establish a continuing tort by the prior owner relative to LTC.
This is because a continuing tort does not arise from the continuance of all the effects or repercussions of a party's alleged conduct. Rather, a continuing tort stems from the continuance of the act or omission that causes the damage.
Citing the Alberta Court of Appeal's decision in RVB Managements Ltd. v Rocky Mountain House (Town), 4 the Ontario Court of Appeal emphasized that for a claim to be "continuing," the legal injury itself must continue, not merely the ill effect of the prior legal injury. However, in this case, the legal injury or act that allegedly caused the damage in question – i.e., the prior owner's historical manufacturing activities – had ended by at least 1973. Albert Bloom's allegation of a continuing tort by LTC in the main action did not "transform" LTC's third-party claim against the prior owner into a continuing tort.
In addition to clarifying the doctrine of continuing tort in the context of environmental claims, Bloom serves as an important reminder that property owners should act diligently to investigate claims of environmental contamination on their properties. Where warranted, a party may be required to commence litigation against others, including neighbours and historical owners, in order to avoid limitation period problems.
Whether a party has actual knowledge of a contamination claim does not necessarily require subsurface testing. Depending on the circumstances, including the available information, a party who refuses to conduct subsurface testing may be found to have actual knowledge of claims in relation to potential contamination.
Bloom also indicates that property owners should not assume that, by merely retaining environmental consultants, their due diligence obligations are being satisfied. The substance of the information and advice being exchanged with the consultant will be important. Owners of contaminated lands should strongly consider retaining specialized environmental legal counsel to advise on the legal implications of the technical advice they are receiving.
Finally, Bloom reminds potential purchasers of the importance of performing meaningful environmental due diligence when acquiring or otherwise dealing with real property, including neighbouring properties, especially in industrial areas.
1. Robert Frank and Ted Brook of our Toronto office acted as counsel for the prior owner at first instance and on appeal. The views expressed by the authors do not constitute legal advice and do not express the views of Norton Rose Fulbright or its clients.
2. This update does not consider the Court of Appeal's analysis of presumptive knowledge regarding claims for contribution and indemnity.
3. SC 2002, c 24, Sched B.
4. At para 18.
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