The recent decision of the British Columbia Supreme Court,
First Capital Realty v. Imperial Oil Limited, emphasizes
the "polluter pays" principles of the BC
Environmental Management Act (the "Act") and
establishes that a purchaser with full knowledge of contamination
may not be responsible for any clean up costs.
The case involved a contaminated property in Nanaimo (the
"Property"). The Plaintiff purchased the property from a
third party who was not involved in the litigation.
Imperial Oil owned the Property until 1993 and operated a gas
station thereon until 1991. The third party never used the
Property, as a gas station or otherwise. The Plaintiff owned the
neighbouring lands and was acquiring the Property for the purposes
of development. One of the conditions of the sale was that the
Plaintiff investigate the environmental condition of the Property.
The Plaintiff did so and it was revealed the Property was
contaminated. The Plaintiff proceeded with the purchase with full
knowledge of this and there was no adjustment in the purchase price
due to the contamination. The Plaintiff subsequently remediated the
Property and brought a cost recovery action against Imperial Oil
under the Act.
Imperial Oil took the position that the Plaintiff brought the
Property fully aware that it was a contaminated site without
seeking a deduction in the purchase price. Therefore, the Plaintiff
assumed the risks associated with that contamination including the
costs of remediation.
The Court held that the fact that the Plaintiff acquired the
Property with full knowledge of the contamination did not affect
its rights to recover the costs of remediation under the Act. The
Court emphasized that the "fundamental principle"
underlying the cost recovery portion of the Act is that the
polluter pays. The Court stated that the Plaintiff made the
purchase with the knowledge that the Act allowed it an ability to
recover its costs of remediation. The Court acknowledged that if
the Plaintiff acquired the Property at a discount due to the
contamination, that would be a relevant consideration because a
plaintiff must not be compensated twice for the cost of
remediation. In this case, however, where there was no discount,
and to not allow the Plaintiff to recover would defeat the purpose
of the Act. The effect of the Plaintiff learning of the
contamination was to make the Plaintiff a "responsible
person" under the Act. However, the Court held that this did
not change the principles of liability under the Act and the
Plaintiff was entitled to recover its remediation costs for the
contamination Imperial Oil was responsible for.
This is a significant decision for the former owners of
contaminated property. A purchaser with full knowledge of the
contamination can still recover under the Act. A key issue to
monitor in the future will be whether a purchaser received a
discount and how this is established.