Canada: Buyer Can’t Void Purchase Of Contaminated Land

Last Updated: November 27 2013
Article by Meredith James and Dianne Saxe

Crosslink Bridge Corp. (Crosslink) purchased contaminated land from CN Railway (CN) in 2008 to develop a tourism, entertainment, retail and sports venue in the Niagara region. Crosslink received a box of environmental reports, including the Certificate of Requirement (also registered on title) that revealed the existence of a Ministry of the Environment Director's order relating to a risk assessment of the contamination. It was not clear, however, whether Crosslink had actually received the order. Could they void the transaction five years later, in the first case ever decided under s. 197 of the Environmental Protection Act?

Crosslink tried to void the transaction in late 2012, after an attempt to sell the land failed because of the contamination. Crosslink claimed $5.913 million from CN for the costs of purchasing, carrying, maintaining and developing the property, on the basis that it had not been provided with a copy of the Director's Order. The Court rejected Crosslink's application, concluding that Crosslink had received a copy of the Order or, in the alternative, that they were estopped from denying that they had received it.

Under s. 197 of the Environmental Protection Act, if the seller of real property fails to provide a copy of a Director's Order related to the land to the purchaser, the sale of the property is voidable at the instance of the purchaser. The key issue before the Court was whether Crosslink had actually received the Order. The Court reasoned that they must have received it, because they requisitioned the order and later advised that all requisitions had been satisfied. [emphasis added]:

[56] There is no dispute that the Certificate of Requirement was not only registered on title but was also provided to the purchasers by CN prior to closing. The Certificate of Requirement refers to the Director's Order and provided notice to the purchaser Crosslink that there was a Director's Order outstanding. However, the registration of the Certificate of Requirement is not the same as giving to the potential purchaser a copy of the Director's Order. Actual notice of Director's Order was required not only by specific direction to CN contained in the Director's Order but also by the relevant provisions of the EPA. As noted above, the Director's Order mandated disclosure of the Order by CN to any subsequent purchaser as follows: " .. ., I order you ... before dealing with the property in any way, to give a copy of this order, including any amendment thereto, to every person who will acquire an interest in the property as a result of the dealing". Section 172(4) of the EPA states: "A dealing with real property by a person who is subject to a requirement imposed under subsection (I) or (3) is voidable at the instance of a person who was not given the copy of the order or decision in accordance with the requirement." It is clear from s. 172( 4) of the EPA that registration on title of a Certificate of Requirement does not relieve the vendor of property from giving specific notice of a Director's Order if the vendor wishes to negate the risk that the purchaser will void the transaction after finding out the specifics of the Director's Order. The consequences of not providing specific notice of Director's Order are clear and unambiguous.

However, the Court found that there were sufficient facts which were not in dispute to establish on a balance of probabilities that CN did provide a copy of the Director's Order to the purchasers prior to closing.

[58] ... While all the facts noted above taken together support this inference, there are certain facts which point overwhelmingly to the conclusion that the Director's Order had been provided prior to closing. The Director's Order was specifically requisitioned by Ms Giahi by letter dated October 30, 2008. Mr. Debono replied to the requisition letter by letter to Ms Giahi dated November 17, 2008, in which he stated: "Please advise us if your client has not yet received a copy of this Order." Mr. Debono did not receive a written reply to this letter. In the conversation between Mr. Debono and Ms Giahi which took place on November 25, 2008, Ms Giahi specifically answered the question which had been posed by Mr. Debono in his letter of November 17th. On November 25, 2008, one week after Mr. Debono had responded to Ms Giahi's requisition for a copy of the Director's Order, Mr. Debono asked Ms Giahi whether there were "any concerns with regarding title or the requisitions submitted in the requisition letter." Ms Giahi responded that there were none. In my opinion, the only reasonable inference to be drawn from these facts is that Ms Giahi had satisfied herself prior to her conversation with Mr. Debono on November 25, 2008, that the Director's Order had been provided to her client or to her solicitors and that her client had no concerns with either the title or requisitions submitted in the requisition letter. In an e-mail from Mr. Thompson dated November 27, 2008, Mr. Thompson advised Mr. Debono that: "The only outstanding issue is insurance." The other facts set out above including the provisions of the agreement of purchase and sale and the Acknowledgment and Undertaking executed by Crosslink on November 25, 2008, are consistent with and support this conclusion.

[59] I therefore find on a balance of probabilities that Crosslink or its solicitors were provided with a copy of the Director's Order prior to closing.

Even if this were not the case, however, Crosslink would be estopped from bringing the application.

[64] I conclude that the defence of estoppel is available to CN in this case. The solicitors for Crosslink, by words and conduct, gave to Mr. Debono the lawyer for CN what was in effect a clear assurance that the Director's Order had been received by Crosslink. It would be neither equitable nor just to conclude that the conduct of Cross link's solicitors had any other effect. Those assurances were intended to affect the legal relations between Crosslink and CN and to be acted on accordingly. Mr. Debono accepted the assurances and acted on them. His evidence was that if he had been advised that Crosslink had not been provided with a copy of the Director's Order, he would have provided a copy of the Order to their solicitors prior to closing. Crosslink cannot now be allowed to conduct itself as if no such assurance had been given.

[65] In applying the principle of promissory estoppel, I am aware of other cases which hold that the defence of estoppel is not available if its effect would be to nullify a statutory provision that imposes a positive obligation on a party. See for example: Tamglass American Inc. v. Goldray Inc. (Trustee of), [2005] A.J. No. 1387, 259 D.L.R. (4th) 108 and the cases referred to therein namely: Maritime Electric Co. v. General Dairies Ltd., [1937) 1 D.L.R. 609 (P.C.); Principal Group Ltd. (trustee of) v. Anderson, (1997), 147 D.L.R. (4th) 229 (Alta. C.A.); F Hoffman-La Roche AG v. Canada (Commissioner of Patents), [2004] 2 F.C.R. 405, 2003 FC 1381 (T.D.).

[66] In my view, the provisions of section 197 of the Environmental Protection Act do not bar the defence of estoppel. The Supreme Court of Canada in Kenora (Town) Hydro Electric Commission v. Vacationland Daily Co-operative Ltd. [1994]18.C.R. 80 stated at paragraph 55: "A statute can only affect the operations of the common law principles of restitution and bar the defence of estoppel or change of position where there exists a clear positive duty on the public utility which is incompatible with the operation of those principles." The duty on a vendor of property subject to a Director's Order is to disclose the order to a potential purchaser. In my view, the defence of estoppel is not incompatible with the statutory obligation to notify the purchaser. There are no other provisions in the in the EPA which are incompatible with the operation of the defence of estoppel.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Meredith James
Dianne Saxe
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