Canada: Millions For Offsite Gasoline Contamination

Last Updated: September 1 2014
Article by Meredith James and Dianne Saxe

The Ontario Superior Court has awarded millions to a neighbouring property owner for historic offsite gasoline contamination. The decision in Canadian Tire Real Estate Ltd. v. Huron Concrete Supply Ltd. illustrates, and will perpetuate, the continuing confusion over liability for off site groundwater plumes. Justice Leitch never explains how her decision can be reconciled with the landmark Smith v. Inco decision on trespass and Rylands v. Fletcher, though the result can be upheld as a matter of negligence and nuisance.

Huron Concrete operated a private fuel outlet at its property from the 1950′s until 2012. Its dip testing of the underground storage tanks (USTs) used to store the fuel was not done in accordance with the applicable Gasoline Handling Act and Technical Standards and Safety Authority (TSSA) regulations, at least since 1989. When the USTs were removed in 2012, they found evidence of contamination.

Canadian Tire demonstrated that when it purchased the adjacent property in 1995, there were no significant environmental concerns. In 2007, however, they found 60 cm of free product gasoline flowing on top of the groundwater at a monitoring well. Further investigation revealed extensive contamination. All but one expert witness agreed that the direction of groundwater flow was from the Huron Concrete property to the Canadian Tire Property.

Based on these facts, Justice Leitch found the defendant, Huron Concrete, liable under strict liability (Rylands v. Fletcher), nuisance, negligence and trespass.

Strict Liability (Rylands v. Fletcher)

Justice Leitch followed a line of pre-Smith v. Inco cases in which the owners of leaky USTs were found liable under Rylands v. Fletcher, and where the escape of gasoline was found to be an escape under the rule. She did not consider whether Huron Concrete's operation was a non-natural use of land, nor refer to the test for this requirement established in Smith v. Inco.

Trespass

In holding  Huron Concrete liable in trespass, Justice Leitch noted that "Canadian Tire "reached out" to Huron Concrete as soon as the free produce was discovered on the Canadian Tire property" but does not explain why this is relevant. This aspect of the decision also seems inconsistent with Smith v. Inco.

Trespass requires a direct and physical intrusion onto the plaintiff's property, caused by a voluntary act of the defendant. The unintended underground migration of contaminants into groundwater is neither "direct" nor "intentional". In Smith v. Inco, the trial court dismissed the trespass claim against Inco because the refinery operations that led to trace nickel contamination in the neighbouring plaintiff's soil was more akin to stones falling from a faulty chimney, than to Inco voluntarily causing nickel to be deposited on its neighbours' property.

Nuisance

Canadian Tire claimed that because the contamination exceeded the applicable provincial standards the contamination 1) presented a potential risk to human health and the environment requiring further investigation and mitigation and 2) restricted its ability to redevelop the land and therefore detrimentally impacted the bundle of property rights associated with the use of the land. 

It seems that Justice Leitch based her decision on the first basis, for which there was significant evidence. Huron Concrete admitted that migration of free product gasoline, gasoline vapours and gasoline impacted groundwater beneath the building on the Canadian Tire Property could pose a significant health and safety risk to Canadian Tire employees and customers. Canadian Tire's expert also found that "in its current state, the Canadian Tire Property is not fit for use in the area of impact and there is a concern for public health because of the vapours and the potential for explosion."

It is unclear whether the second basis could have succeeded. In Almel Inc. v. Sunocco, the Ontario Court of Justice found that where the contamination is not sufficient to justify the plaintiff's discontinuance of their current use of the property, it would not create an actionable nuisance. Nothing in Smith v Inco suggests that interference with redevelopment would be sufficient to ground a claim in nuisance. 

Negligence

Justice Leitch found Huron Concrete negligent because it failed to comply with applicable regulatory standards for managing underground tanks of petroleum products. She found that evidence regarding the source of the contamination on the Huron Concrete property and the pathway it followed to reach the Canadian Tire property satisfied the causation requirements. This aspect of the decision seems well supported by applicable law.

Damages

Canadian Tire was awarded $3.6 M in damages to remediate its property to the state it was in before the release of contaminants. It was also awarded over $1.1 M in out of pocket expenses as well as costs.

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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Authors
Meredith James
Dianne Saxe
 
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