COURT OF APPEAL FOR ONTARIO
CITATION: Sorbam Investments Ltd. v. Litwack, 2022 ONCA 551
DATE: 20220725
DOCKET: C69808
Huscroft, Nordheimer and Copeland JJ.A.
BETWEEN
Sorbam Investments Ltd.
Plaintiff (Respondent)
and
Alan David Litwack, Gary Michael Litwack and Deborah Ruth Litwack, in their capacity as Estate Trustees of the Estate of Moses Litwack, deceased, Samuel Litwack and 1129292 Ontario Limited
Defendants (Appellant)
Tamara Farber and Mark A. De Sanctis, for the appellant
Michael S. Hebert and Cheryl Gerhardt McLuckie, for the respondent
Heard: June 21, 2022
On appeal from the judgment of Justice Robyn M. Ryan Bell of the Superior Court of Justice, dated July 29, 2021, with reasons reported at 2021 ONSC 5226 and 2021 ONSC 6504.
REASONS FOR DECISION
[1] The appellant, 1129292 Ontario Limited, appeals from the trial judge’s judgment finding it liable in nuisance and negligence in relation to the migration of chemical contaminants from its land to the respondent’s land.
[2] The appellant raises three interrelated grounds of appeal. These grounds advance a new theory of defence which the appellant neither pleaded below nor led evidence at trial to support. In our view, it would be unfair to the respondent to allow the appellant to raise this new theory. Further, no evidentiary record was developed by the appellant at trial which would allow this court to consider this new theory.
[3] The appeal is dismissed for the reasons that follow.
FINDINGS OF THE TRIAL JUDGE
[4] The appellant and the respondent owned neighbouring properties. The appellant purchased its property from the Litwacks in 2007.[^1] The Litwacks’ former tenants had operated a dry cleaning business on the property. The respondent owned the neighbouring property to the south from April 1987 until it was sold in April 2017.
[5] The central issues at trial were whether contaminants had migrated from the appellant’s property to the respondent’s property (as alleged by the respondent) or vice versa (as alleged by the appellant), and when the appellant received notice of the contaminant migration issue.
[6] Based on her assessment of the expert evidence at trial, the trial judge found that the contaminants found on the respondent’s property had migrated there from the appellant’s property through permeable material in the soil (silty, sandy material). She found that the groundwater flow across the respondent’s property was from the northwest towards the west-southwest, that is, from the appellant’s property towards the respondent’s property. She also found that the behaviour and shape of the contaminant plume on the respondent’s property was consistent with contamination migrating from the appellant’s property to the respondent’s property.
[7] The trial judge found that although the appellant was not the initial spiller of the contaminants (which she found, on a balance of probabilities, came from the dry cleaning business run by the previous landowners’ tenants), the appellant was on notice of the migration of contaminants from its property to the respondent’s property by, at the latest, the intervention of the Ministry of the Environment (the “Ministry”) in May 2011. She found that the appellant allowed the migration of contaminants to continue after that date, and failed to take reasonable steps to address the problem within a reasonable time. The trial judge found that as a result of the appellant’s inaction once it had notice of the migration problem, there was an appreciable increase in the environmental contamination of the respondent’s property, and the respondent suffered harm. She concluded that the appellant’s failure to take any meaningful steps to remediate and stop the migration of the contaminants after it had notice of the problem constituted nuisance and negligence.
[8] With respect to nuisance, the trial judge found that the migration of contaminants from the appellant’s property caused physical damage to the respondent’s property, prolonged the sale process for the respondent’s property and, ultimately, decreased the price for which the property sold. She found that this damage met the threshold of being a substantial and unreasonable interference with the respondent’s use or enjoyment of its property, and thus constituted a nuisance.
[9] With respect to negligence, the trial judge found that as an adjoining landowner, the appellant owed a duty of care to avoid acts or omissions that would cause harm to the respondent. She found that rather than following the direction of the Ministry, the appellant made a calculated decision to ignore the Ministry’s requests that the appellant investigate and address the migration of contaminants to the respondent’s property. This behaviour was not consistent with the standard of care of a reasonable landowner. In light of her finding that the migration of contaminants from the appellant’s property to the respondent’s property continued after the appellant had knowledge of the issue, and that there was an appreciable increase in environmental contamination to the respondent’s property as a result of the appellant’s inaction, the trial judge found that the appellant caused damage to the respondent.
[10] The trial judge awarded damages based primarily on loss of market value to the respondent’s property due to the chemical contamination. Based on expert evidence tendered by the respondent, which the trial judge accepted, she found that the loss of market value due to the nuisance and negligence of the appellant was $1,200,000. In addition, the trial judge awarded $91,307.21 for engineering expenses to obtain a risk assessment and record of site condition, which she found were warranted to facilitate the sale of the respondent’s property. Thus, the total damages were $1,291,307.21, plus prejudgment and postjudgment interest.
ANALYSIS
(1) Liability and Damages
[11] The appellant’s central argument on appeal is that the trial judge erred in law by failing to assess what damage was caused by the appellant after it had knowledge of the migration. The appellant raises three grounds of appeal in this regard:
a) Did the trial judge err in her application of the law of nuisance by failing to assess incremental interference with the respondent’s property by the appellant after the appellant had knowledge of the contaminant migration issue?
b) Did the trial judge err in her application of the law of negligence by failing to assess incremental damage to the respondent’s property by the appellant after the appellant had knowledge of the contaminant migration issue?
c) Did the trial judge improperly assess damages by not considering incremental damages after the appellant had knowledge of the contaminant migration issue?
[12] In substance, all of these grounds raise the same issue. They fault the trial judge for failing to approach the legal and factual issues from the perspective of whether some or all of the damage to the respondent’s property was caused before the appellant received notice of the contaminant migration issue in 2011. However, as a review of the pleadings and the trial evidence makes clear, this theory of defence was not raised by the appellant in its pleadings or in the trial evidence.
[13] The respondent’s claim alleged that contaminants from the appellant’s property migrated to the respondent’s property and caused damage to it. The respondent alleged that the migration of contaminants began prior to the appellant’s purchase of the neighbouring property in 2007, and was ongoing. It also alleged that the appellant was put on notice about the migration of contaminants in 2010, and took no meaningful steps to prevent the continued migration of contaminants or to remediate the situation. The respondent alleged that this constituted nuisance, negligence, and was in breach of s. 99 of the Environmental Protection Act, R.S.O. 1990, c. E.19.[^2]
[14] The appellant denied liability. In its statement of defence, the appellant pleaded that the contaminants did not flow from its property to the respondent’s property, but rather that the source of the contamination was located on the respondent’s property, and the direction of the groundwater flow was such that the contamination flowed from the respondent’s property to the appellant’s property. In addition to denying liability, the appellant brought a counterclaim against the respondent on the basis that the contamination migrated from the respondent’s property to the appellant’s (essentially a mirror image of the respondent’s claim).[^3]
[15] The appellant’s defence did not include a pleading in the alternative, to support the arguments now raised on appeal, that if the contaminants had migrated from the appellant’s property to the respondent’s property, all of the damage was done before the appellant had knowledge of the contaminant migration issue. Nor was there a pleading that to the extent that some of the damage was done before the appellant had knowledge, the appellant should only be responsible for incremental damage done after it had knowledge of the contaminant migration issue.
[16] Not surprisingly, since the issue of incremental damage was not raised in the appellant’s statement of defence, it was also not pursued by the appellant at trial. Trial counsel for the appellant (not counsel on appeal) did not raise the incremental damage theory in the trial evidence, either by way of cross-examination of the respondent’s witnesses or through the appellant’s own witnesses.
[17] Three engineers were called as expert witnesses by the parties at trial (one on behalf of the respondent, and two on behalf of the appellant). In general terms, the expert evidence addressed hydrology and contaminant migration in water and soil. The respondent’s expert opined that the soil and water movement between the properties supported the conclusion that the contaminants migrated from the appellant’s property to the respondent’s property. The appellant’s experts opined that the soil and water movement was such that the contamination flowed from the respondent’s property to the appellant’s property.
[18] Importantly, in cross-examination of the respondent’s expert and in examination of its own experts, trial counsel for the appellant did not ask questions to elicit evidence about whether some or all of the migration of contaminants from the appellant’s land to the respondent’s land happened in the time period before the appellant had knowledge of the contaminant migration issue. Rather, the examinations of these experts focused on the path of migration of the contaminants – whether they moved from the appellant’s property to the respondent’s, or vice versa.
[19] Similarly, when evidence was led at trial with respect to damages, trial counsel for the appellant did not raise the theory of incremental damage with some or all of the damage to the respondent’s property occurring before the appellant had knowledge of the contaminant migration issue. The respondent led expert evidence from a real estate appraiser on the quantum of decrease of the market value of the respondent’s property as a result of the contamination. This evidence was uncontradicted because the appellant did not lead any evidence on the issue of loss of market value of the property, and it was accepted by the trial judge.
[20] The respondent’s appraiser gave evidence about different possible methods of quantifying the decrease in market value of the respondent’s property due to the contamination. He explained that the appropriate method was the direct comparison approach, which involved calculating a value for the respondent’s property if it had not been impacted by contamination based on comparable properties. The appraiser valued the property, but for the contamination, at $3,000,000. He then considered four case studies of sales of commercial properties in 2016 impacted by contamination by subsurface compounds in either the soil or the groundwater. Based on these studies, the expert opined that price reductions of market value between 18 and 48.1 percent were observed. Ultimately, the expert opined, and the trial judge accepted, that the market value of the respondent’s property decreased by 40%, or $1,200,000, as a result of the impact of the contaminants (i.e., from $3,000,000 to $1,800,000). The trial judge noted that the ultimate sale price of the property in 2017 of $1,600,000 provided some validation for the opinion of the respondent’s expert.
[21] Again, trial counsel for the appellant did not raise with the respondent’s damages expert the issue, now raised on appeal, of whether the decrease in value to the respondent’s property had already happened by the time the appellant had notice of the contaminant migration issue. Trial counsel for the appellant cross-examined about issues that might call into question the expert’s appraisal of the value of the respondent’s property had it not been contaminated (for example, the condition of the building; that it had not rented well, which made it less marketable as an income-producing property; and the comparability of the properties the appraiser relied on in his valuation). But trial counsel for the appellant did not ask any questions of the appraiser about whether the property had already declined in value prior to May 2011, when the trial judge found that the appellant received notice of the contaminant migration issue and failed to take any steps to address it.[^4]
[22] The appellant directed the court to a brief passage in its closing submissions at trial, along with several points in its written submissions, where its counsel argued that if the trial judge were to find that the contamination came from the appellant’s property, the appellant should not be held responsible for all of it. Trial counsel asserted that if the appellant was found liable for the contamination, the respondent’s property was already contaminated when the appellant bought the neighbouring property, and that the appellant’s responsibility should be apportioned in some way. In our view, this was too little, too late, as the appellant did not plead this position in the statement of defence and laid no evidentiary foundation for apportioning its responsibility to incremental damage once it was on notice of the contaminant migration issue.
[23] An appeal is not a forum for an appellant to advance a fundamentally different case than was advanced at trial. In the circumstances of this case, where the appellant did not plead or lead evidence at trial to support the arguments now raised, it is not appropriate for this court to exercise its discretion to allow the appellant to raise the new theory on appeal. It would be unfair to the respondent, and the evidentiary record from the trial is wholly inadequate to consider the issues: Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130, at paras. 18-24; Frohlich v. Ferraro, 2017 ONCA 978, 85 R.P.R. (5th) 175, at para. 5.
(2) Prejudgment Interest
[24] Although not pursued in oral submissions before this court, the appellant’s written submissions challenged the trial judge’s decision not to exercise her discretion under s. 130 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”), to apply an interest rate lower than the presumptive rate under s. 127, or to allow prejudgment interest in relation to the loss of value of the respondent’s property for a shorter period than the presumptive period in s. 128. We do not accept this submission.
[25] Section 130 of the CJA gives a trial judge a discretion to depart from the presumptive interest rate for prejudgment interest and from the presumptive time period for which prejudgment interest is payable (or to disallow interest entirely) where the trial judge “considers it just to do so”. An appellate court may only interfere with a trial judge’s exercise of discretion in relation to the rate or period for prejudgment interest where there has been a wrongful exercise of discretion by the trial judge in that they gave no weight or insufficient weight to relevant considerations: Stellarbridge Management Inc. v. Magna International (Canada) Inc. (2004), 2004 CanLII 9852 (ON CA), 71 O.R. (3d) 263 (C.A.), at para. 85, leave to appeal refused, [2004] S.C.C.A. No. 371.
[26] The trial judge carefully explained why she declined to exercise her discretion to depart from the presumptive rate and time period for prejudgment interest in ss. 127 and 128 of the CJA. We are not persuaded that there is any reason to interfere with her exercise of discretion.
DISPOSITION
[27] The appeal is dismissed, with costs to the respondent in the amount of $35,000, inclusive of disbursements and HST.
“Grant Huscroft J.A.”
“I.V.B. Nordheimer J.A.”
“J. Copeland J.A.”
[^1]: The respondent’s claim against the Litwacks was dismissed following a motion for summary judgment: Sorbam Investments Ltd. v. Litwack, 2017 ONSC 706, 77 R.P.R. (5th) 148, aff’d 2017 ONCA 850, 87 R.P.R. (5th) 1.
[^2]: The trial judge dismissed the respondent’s claim under s. 99 of the Environmental Protection Act, finding that the provision was not applicable in the circumstances of a party who was not the initial spiller or discharger of a contaminant. The respondent does not challenge that finding.
[^3]: The counterclaim was abandoned at the outset of the trial. The appellant maintained its position that the contamination flowed from the respondent’s property to its property, but took the position that it suffered no damage as a result.
[^4]: Trial counsel for the appellant also argued that damages should be based on cost of remediation rather than decrease in value of the respondent’s property as a result of the contamination. This submission was rejected by the trial judge on the basis that remediation of the respondent’s property would be ineffective without the appellant taking steps to remediate the source of the contamination on its property. In any event, the argument made at trial that the cost of remediation was the appropriate measure of damages is distinct from the new theory raised on appeal that the trial judge failed to consider incremental damage after the appellant had notice.