Canada: Resolving Litigation Over Contaminated Land

Contaminated land disputes pose a number of complex and often multidisciplinary problems to a litigator. Problem solving requires consideration of a number of converging influences including common law, a complex regulatory regime, technical engineering and chemical knowledge, market perceptions and unique personal factors of the individuals involved. This brief paper will try to give an overview of most of these factors and discuss the options and strategies available to the litigator to try to resolve disputes over contaminated land. This paper is not meant for the environmental specialist. It is more suited to a litigator or a party who has limited or perhaps no experience in dealing with an environmental claim.

What is an environmental dispute over contaminated land?

This paper has a somewhat narrow focus. My intent is to discuss issues arising in connection with privately owned real property that has been affected by "contamination". I will define contamination very broadly as any chemical that is present at the real property as a result of some human activity and that is considered undesirable by the current property owner1.

Disputes over contaminated land can arise at any time, but are most common in the context of some attempt to purchase or sell an interest in the land. Most landowners do not pay much attention to whether or not their land is affected by contamination as long as their current use is not affected. Typically it is during times of transition, such as the purchase, sale or refinancing of land, that greater scrutiny is paid to whether or not there are any contamination concerns.

When contamination is discovered in the context of an ongoing transaction, there is a high risk the transaction will not proceed as originally planned, if at all. Additional bargaining between the parties, or loss of the bargain in its entirety, will inevitably create questions as to who is ultimately responsible for any losses a party may suffer and how to recoup those losses. Litigation is not an unusual next step.

If a proposed sale does not go through at all, the jilted vendor may wish to pursue the person responsible for the contamination and seek damages commensurate with the lost sale, as well as the cost of remediation of the property. If a sale takes place at a discounted value, litigation may be over the amount of the discount that had to be given.

Contamination might be discovered after a sale, perhaps in the context of a refinancing. In such a case, the owner may look to previous owners or others who are thought to be responsible for the contamination. Consideration might also be given as to whether the contamination took place during or before the current ownership. If the latter, questions might be asked as to whether any engineers or other consultants involved in the purchase should have identified the contamination before the purchase.

This is but a sample of the many ways an environmental dispute over contaminated land can arise. Once it does, the unique features of environmental disputes rapidly become apparent.

The unique features of environmental disputes involving contaminated land.

The sheer number of legal "problems" the discovery of contaminated land can give rise to makes this a truly unique area of law. Contamination can lead to injury to persons or other living organisms on the property2. It can give rise to claims of property damage3. Construction costs may be higher4. The effects of contamination may be acute and short term (such as headaches, nausea, odours) or long term (radioactive soil, petroleum hydrocarbons)5. Land might be permanently affected, yet use may not be impaired (as in the case of a fully tenanted building with petroleum hydrocarbon contamination deep below the surface)6. Concern may be for actual damage or for the risk of future damage such as the risk of developing illness, the risk of regulatory action compelling an owner to remediate or the risk of a lost or reduced sale.

All of these issues are to be evaluated in the context of a mysterious contaminant often with a strange chemical name that is usually not easy to see or smell but detectable only with testing at a specialised laboratory7. Once identified, the "harm" caused by that contaminant is proven through technical opinions of experts based on complex technical modelling calculations, which may themselves be the subject of much debate. Equally uncertain will be the available remedies to address the harm, their cost and effectiveness. Contamination, in other words, is the perfect vehicle to give rise to the fear of the unknown. Questions such as "What is it?", "How deep is it?", "How far has it and will it spread?", "Is it dangerous?", "What can be done to stop the spreading?", "Can it be cleaned up?", "Should it be cleaned up?", "How much will it cost?", are all questions a client will ask, yet often cannot be answered with any great certainty until extensive and expensive investigations are carried out.

The task of a litigator is to help address all these questions (and more) in a way that leads to a resolution that is acceptable to the client, whether this be by way of a negotiated solution or one imposed by a judge or an arbitrator.

What does all this mean to the litigator?

One of the main implications of such a complex task is that a litigator needs expert advice almost immediately.

It might be tempting to delay the use of an expert as much as possible as a way of controlling costs. Environmental experts in particular do not come cheap, especially as their opinions are, in turn, often dependent on conducting expensive underground investigations of the property and sometimes its surroundings. Yet this could be a fundamental mistake that will often have the effect of prolonging the time it will take to reach a resolution while increasing the cost of litigation.

The very existence of contamination is often simply not provable without a chemical analysis of the soil and groundwater at the property. That analysis in turn must be compared to published standards to get some sense of whether the level is acceptable or not. Defining the extent of the contamination and understanding whether air, soil or groundwater (or all three) are affected can often only be understood by generating technical reports from environmental engineers, hydrogeologists and toxicologists.

Advice of a more forensic nature may also be needed. While in a surprising number of environmental disputes liability is not really in dispute (issues of quantification of damages and fashioning the appropriate remedy are far more common), there are times when expert advice is needed on questions such as the original source of a contaminant, its age, the likely cause of the contamination or the likely fate and transport of the contamination in the future.

Helping the litigator understand the extent of the problem is only the first step to the advice an expert can give. A good expert can assist in the drafting of pleadings, assessing the strength and weakness of each side's case, providing expert testimony, help in cross-examining the opponent's expert, and fashioning a remedy.

Finding a good expert could be the subject of another paper in itself. Some of the most important qualities are excellent communication skills, a willingness to translate complex problems into layman's terms, the ability to write clear concise reports that arrive at fair but definitive conclusions, and above all the ability to offer practical advice that leads to a real solution.

Determining damages and fashioning a remedy

Perhaps the single most important reason disputes over contaminated land fail to resolve quickly is because at least one party is not clear how they want to resolve the problem. This is more common among plaintiffs than defendants and is especially likely to happen when a plaintiff is dealing with a contamination issue for the first time. Trite though it is to say, unless the plaintiff has a clear idea what they want, negotiating a settlement is going to be impossible.

The lawyer's role in this is crucial. Setting a client's expectations is not simply a matter of giving the client a ball park number for a realistic monetary judgment or settlement. The lawyer needs to delve deeply into what the client really wants. Is the property one the plaintiff wishes to keep or are they willing to sell it? If they are willing to sell, then an offer to sell to the alleged tortfeasor at fair market value should be immediately considered, as it could result in a quick resolution of the issue. Failing that, a fair but discounted sale price to an arm's length third party may be the best and fastest way to crystallise the plaintiff's damages. Good technical advice is needed to ensure proper disclosure of known issues to potential buyers without causing an improvident sale. If they wish to keep the property, are they looking only for a monetary settlement or do they wish the property remediated? Are they willing to allow the alleged tortfeasor to undertake the remediation or do they want to engage their own remediation contractor? How much regulatory involvement are they prepared for? Do they understand that "remediation" is not an absolute term, but comes in different forms often tied to use? Do they have a clear and realistic idea of future use of the land and possible redevelopment potential? Are they willing to allow an existing building to be demolished in order to undertake the remediation? Does all contamination have to be removed or would they tolerate some remaining in place as long as they were satisfied it was permissible to do so?

Similar questions must be asked of the defendant of course. Is the client willing to purchase the property at fair market value? This should be especially easy if the client thinks the property value is not affected by any contamination. Any such client (assuming liability is not in issue) should be willing to consider buying the property at fair market value and taking the risks of any loss on sale resulting from the alleged contamination upon themselves. Failing that option, is the client willing to undertake the remediation? If so, what level of remediation is appropriate? Over what time frame? Does the client wish the certainty of a quick cash payout, or are they more interested in a long term solution?

Until the lawyers and the clients know the answers to these questions, settlement is but a dream at the end of a long and winding road in which the toll fees are measured in billable hours of lawyers and consultants, often coupled, perhaps most sadly, with tremendous stress, uncertainty and anxiety on the part of the parties.

The Dispute Resolution Forum

Of course a quick settlement may not be available, even if both clients have properly considered all relevant questions along the above lines in cases where the desired outcomes of the parties are not compatible. One party may think a purchase is the proper remedy, while the other may wish a full remediation. One may insist on an immediate cash payout of damages, while the other may be looking at committing to a long term remediation. In such cases, choice of the dispute resolution forum may be crucial in obtaining the desired outcome.


Litigation is the most obvious starting point. Sometimes litigation must be commenced to protect against the expiry of a limitation period or to secure relevant information through examinations for discovery. But it is relatively rare for litigation of environmental disputes to proceed to trial.

In addition to all the usual downsides to proceeding to trial of cost, delay and uncertainty of result, perhaps the biggest problem with asking a trial judge to resolve a dispute over contaminated land is the very limited toolbox of remedies that is available to a judge.

While equitable remedies such as specific performance are technically available, I am not aware of any case in which a party has been forced to buy or sell contaminated land through an order of specific performance where the parties were not already in a vendor/purchaser relationship. Nor, for obvious reasons, is a court likely to want to exercise the supervisory powers that are necessary to enforce an order compelling one party to remediate another's property. As a result, for all practical purposes, a court faced with a dispute over contaminated land is likely to be limited to only one remedy – an order for damages in the form of a one-time cash payment.

The potential difficulties with this approach can be seen in the recent Ontario decision in Midwest Properties Ltd. v. Thordarson8. The court ordered the defendant to pay the plaintiff damages in the amount of $1.3 million, as this was the amount the court found it would cost the plaintiff to remediate the contamination on its land caused by its neighbour, the defendant.

The immediate difficulty with this solution is that it is based on an estimate of the cost of a remediation that has not yet been undertaken. In light of all the variables involved in assessing and undertaking remediation, what are the odds that the $1.3 million is either an over- or underpayment? Once the plaintiff commences the remediation, they will have no ability to secure any further compensation if funds run out before the remediation is complete. Conversely, there is of course no obligation to reimburse the defendant should remediation turn out to be less costly than anticipated. Short of some assurance that the estimate is very generous, what plaintiff would want to accept a judgment that also bestows the risk of cost overruns on the "winner"?

But perhaps more problematic is the fact that after the judgement is obtained the plaintiff is under absolutely no legal obligation to use the money to undertake any remediation of the property at all. As with any award of damages, the award in this case came with no strings attached. The plaintiff is free to do what it wishes with the money it receives under the judgment. It can use it to clean up the site (which is how the number was arrived at), or it can spend the money elsewhere. To understand how the implications of this could be quite harmful to the defendant, one needs to understand a little of the regulatory regime lurking in the background.

In Ontario, regulatory control over contamination that crosses property boundaries and causes an adverse effect (a very broadly defined term) lies with the MOECC, which is responsible for the administration and enforcement of the Environmental Protection Act9. Under the Act, a current or former owner of land that is the source of contamination and causes an adverse effect is responsible for the cost of remediation. The only requirement is that the person be a current or former owner and has nothing to do with whether or not that owner was actually responsible for the contamination in the first place. Well established caselaw and Ministry policy make it clear that under the legislative scheme, the Ministry has no duty of fairness and can pick and choose any person on the chain of title to be the subject of its onerous order-making powers to force a remediation.10

The effect of this decision is that a defendant who is the subject of an order to pay damages, as in the Midwest decision, might well be liable to pay the remediation costs twice - once to the plaintiff and once to comply with a subsequent MOECC order in the event the plaintiff does not use the funds to remediate. In fact any former owner of the property could be subject to such an order. The fact the current owner has the funds but chooses not to use them to remediate, is not considered relevant11.

In Midwest, it turns out that the defendant was already under an MOE (as they then were called) order before trial. Somewhat unusually, the MOE was also an intervenor and the decision states that the MOE "agreed that it would be forced to redirect its remediation order in the event the respondents were ordered to pay remediation damages to Midwest." It is not clear, in light of the lack of a fairness obligation, why the MOE felt "forced" to make such a commitment. Nor is it clear whether the same result will follow in a future case in which the MOECC is not a party and no such undertaking is given to the court. Absent such an undertaking, the potential for unfairness to the defendant remains.

For the above and many other reasons, a one-time cash payment from a judgement after trial may well be an inadequate, or even potentially unfair, remedy. It is not surprising therefore that the majority of environmental disputes over contaminated land are resolved outside the courtroom.


Arbitration is by no means inexpensive. There is ample literature elsewhere on the costs and benefits of arbitration. If done right, an arbitration should be quicker and somewhat cheaper than a trial. It also has the benefit of allowing for confidentiality which may be important to some parties. In the context of environmental disputes however, perhaps the most important advantage of using an arbitrator is the ability to select an arbitrator who will be familiar with the technical concepts and the type of expert evidence that is likely to be presented at trial.

Arbitration is often invoked as a "second dispute mechanism" after an original settlement of an environmental dispute. Long term settlements between parties often involve a promise by one party to undertake a remediation or an indemnity in the event of future harm. Such agreements will typically include an arbitration clause sending what may be a narrow but highly technical issue to arbitration. But there is no reason why disputes of first instance over contaminated land could not also be considered candidates for arbitration.

The main disadvantage of arbitration is that, like a court proceeding, the most likely and practical outcome that can be expected will be a one-time monetary award. Just like the courts, no arbitrator is likely to make an award that requires any long term supervisory role (unless of course the parties are willing to pay for such a service). So unless one is dealing with a very narrow issue such as may arise in the context of an existing remediation agreement or indemnity, arbitration may well carry the same disadvantages as a court trial.


If the parties are willing to do so, mediation offers the most flexibility in terms of available remedies. For the vast majority of environmental disputes, mediation has the most potential to achieve a result that is most palatable to all parties involved. The remedies available are limited only by the creativity of the parties and, in some cases, their willingness to enter into a longer term relationship to resolve their differences.

As illustrated by the comments above on the potential pitfalls of a one-time cash settlement in the case of a property that has not yet been remediated, settlement involves risk – the risk of over- or under-payment, the risk that even though money has been paid, the remediation will not be undertaken or completed, the risk of future regulatory action and even the risk that a future owner of the land, completely unrelated to the present plaintiff may become a "good faith buyer for value without notice" and thus put the defendant in jeopardy of being sued a second time for the same matter.

Managing these risks is one of the biggest benefits of a mediated solution. Settlement funds can be placed in a trust and used to fund a proposed remediation. Provisions can be made for cost overruns or reimbursement of unused funds. An indemnity can be given to cover the risk of future actions by other neighbours or regulators. Future costs such as may be incurred in a redevelopment can also be addressed by way of indemnity. In some cases, registration of an appropriate instrument on title12 or elsewhere13 can help provide appropriate notice of any remaining contamination to future owners.

Arriving at a mediated solution will often require the parties to agree on the technical, chemical and engineering aspects of the problem either before or during the mediation. Unless the parties agree on such fundamental questions as the extent of the contamination, whether or not it poses any immediate or future risk, the most acceptable option for remediation, the likely cost of remediation, the impact of remaining contamination on future development or future buyers, a mediated solution is unlikely. One way to arrive at such agreement is to allow the respective experts a chance to communicate with each other and try to arrive at a common technical understanding of these issues. Lawyers are naturally wary of the loss of control such an approach entails, but in some cases this may well be the best available option. In other cases a mediator familiar with cases of this nature can also assist.

When one appreciates the myriad of possible ways a settlement can be reached through a mediation, one can see how much more likely it is that a settlement can be found that is palatable to all parties. It is for this reason that environmental disputes over contaminated lands are most suitable to resolution by mediation.


Disputes over contaminated land usually require a multidisciplinary approach in order for a resolution to be reached. Both the client and the litigator will be exposed to unfamiliar chemical and engineering concepts that are inextricably intertwined with the legal issues. Market perception, timing and resources add further levels of complication to the analysis. A litigator who has a good knowledge of the available options, has a sense of which ones are most desirable to the client and understands the underlying technical issues is far more likely to steer the matter to a settlement quickly and efficiently.


1 In December 2015, the Ontario Auditor General defined contamination as "the presence of a chemical, organic or radioactive material or live organism in the air, soil, water or sediment." (2015 Annual Report, Office of the Auditor General of Ontario, December 2015, Chapter 3, S.3.10, p.400) This definition seems overly broad since it suggests that human beings, pure water or clean air, should be considered contaminants.

2 Berendsen v. Ontario, [2010] O.J. No. 1181, 2010 ONCA 224.

3 Tridan Developments Ltd. v. Shell Canada Products Ltd., 2002, CanLII 20789 (ON C.A.).

4 Biskey v. Chatham-Kent (Municipality), 2012 ONCA 802.

5 Heighington v. The Queen (1987), 2 C.E.L.R. (N.S.) 93, aff'd. 4 C.E.L.R. (N.S.) 65 and Sevidal et al v. Chopra et al (1987), 2 C.E.L.R. (N.S.) 173.

6 Smith v. Inco Limited, 2011 ONCA 628 (CanLII); 107 OR (3d) 321; 62 CELR (3d) 92; [2011] CarswellOnt 10141; 207 ACWS (3d) 605 (in which nickel contamination deposited onto soil did not prevent ongoing use and occupation of affected residences.)

7 In fact some of the levels prescribed by the Ontario Ministry of the Environment and Climate Change ("MOECC") generic criteria are so low as to be just within the limits of what laboratory equipment can even detect – hardly something that is likely to be detectable by sight or smell.

8 2015 ONCA 819 (November 27, 2015).

9 R.S.O. 1990, c. E.19.

10 The Corporation of the City of Kawartha Lakes v. Director, Ministry of the Environment, 2012 ONSC 2708.

11 See for instance the series of decisions before the Ontario Environmental Review Tribunal involving Cascades Fine Papers, ERT file 11-214 Cascades Fine Papers Group Inc. v. Moe and ERT approved minutes of settlement (May 2, 2013).

12 Registration of an instrument such as a restrictive covenant or restriction under s. 118 of the Ontario Land Titles Act might be possible in some instances to ensure proper notice of remaining contamination is given to future owners.

13 A common form of off-title registration in Ontario is a Record of Site Condition filed on the Environmental Registry administered by the MOECC.

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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