ONTARIO SUPERIOR COURT OF JUSTICE
CITATION: 6038212 Canada Inc. v. 1230367 Ontario Ltd., 2013 ONSC 3022
COURT FILE NO.: CV 09-45535
DATE: 20130524
BETWEEN:
6038212 CANADA INC. and John Yang
Plaintiffs
– and –
1230367 Ontario Ltd. and Surinder Sumra
Defendants
– and –
Zheng Anderson
Third Party
COUNSEL:
Steven J. Greenberg, for the Plaintiffs
Hank Witteveen, for the Defendants
Ian Stauffer and Lesley Joseph, for the Third Party/Defendant
HEARD: April 9 - 12, 15 -19, 2013
REASONS FOR JUDGMENT
J. Mackinnon J.
[1] The property located at 1119 – 1143 Baxter Road in Ottawa (“Baxter Road”) is contaminated with PCE[^1] likely arising from past operation of a dry cleaning business on the premises. The defendant, Surinder Sumra, is the sole owner of 1230367 Ontario Ltd. (“123”). That company purchased the Baxter property in 1997. At that time, actual dry-cleaning no longer occurred on-site but there was still a depot where customers could drop off and pick up their dry cleaning. John Yang is the sole owner of 6038212 Canada Inc. (“603”). In 2005, 603 purchased the Baxter property. The third party/defendant, Zheng Anderson, acted for 603 on the transaction. Mr. Yang and 603 sue for damages arising from alleged fraud by 123 and Mr. Sumra in falsely stating that the property was not contaminated and in actively concealing the fact of the contamination. As against Ms. Anderson, Mr. Yang and 603 allege that her conduct of the real estate transaction fell below the standard of care.
The AMEC Report
[2] When 123 purchased Baxter Road in 1997, no environmental assessment was required. This had changed by the time Mr. Sumra’s mortgage came up for renewal in 2003. An environmental assessment was a condition of financing. The mortgage company retained AMEC Earth and Environmental Limited (“AMEC”) to do a Phase I site assessment. That report is dated November 21, 2003. No intrusive investigations were conducted. The findings were based on visual inspection and other information including that the former on-site dry cleaner ceased in 1997 and was thought to have been operated on a closed loop system. AMEC concluded that “no potential environmental concerns associated with the current and historical use of the Site and/or its environmental condition were identified. As such, no further environmental assessment was warranted at the Site at this time”.
[3] The bank provided the financing. Mr. Sumra’s lawyer, Michael Carey, kept a copy of the AMEC report in his file.
Baxter Property is listed for Sale
[4] Mr. Sumra listed Baxter Road for sale with Donald Abraham at Re/Max Metro-City in April 2005. The asking price was $1,450,000. An offer was received at $1,425,000 subject to an environmental condition. The purchaser arranged for an environmental assessment by Paterson Group (“Paterson”). Its historical review identified the former dry cleaning operation on the premises for almost 20 years. Paterson recommended a limited Phase II assessment which was done by drilling one borehole at the rear of the unit where the dry cleaner had been located. The ensuing report dated June 6, 2005 identified PCE in the soil sample within the MOE standards and in the groundwater in excess of standards. Paterson recommended that a supplemental investigation be carried out to delineate the extent of the contamination and to determine the appropriate remediation approach.
[5] As result of this report, the deal did not proceed. However, Mr. Abraham already had a backup offer at the full list price. This second offer was presented by Cancorp Realty Inc. Mr. Sumra paid half the cost of the June report so that the first offeror would allow him to use it. Disclosure was made to the second offeror. Mr. Sumra also commissioned the supplemental investigation from Paterson. That report was dated August 5, 2005. Additional boreholes had been drilled. No soil contamination in excess of standards was identified. However, groundwater with PCE concentrations in excess of MOE standards was identified in three of the five boreholes placed around the former location of the dry cleaners.
[6] Paterson advised that the contaminated groundwater did pose a significant liability to the use of the property but that the contaminated groundwater was not a health concern to the occupants of the building. Nor were there any known “sensitive receptors” in the vicinity of the contaminated groundwater plume which could pose a concern to the natural environment.
[7] The August report identified a remedial option and stated: “From a cost perspective, it is not possible to accurately determine the remedial costs. However, for discussion purposes, we suggest that a budget of $100,000 to $150,000 be allocated to the remedial operations noted above.”
[8] After this report came out, the second offeror also chose not to proceed.
[9] By now it was mid-August. Mr. Abraham told Mr. Sumra he could still offer the property for sale, but would have to disclose the reports to any potential purchaser, and no bank would lend on the property until the problem was rectified. Although the listing did not actually expire until October 31, 2005, the For Sale sign was removed. Mr. Sumra says that Mr. Abraham essentially withdrew at this time. Mr. Abraham did not present any further offers. He did not know about the transaction between Mr. Yang and Mr. Sumra until after it had closed. Re/Max forwarded an invoice claiming commission under a 90 day holdover clause. Mr. Sumra disputed his responsibility for commission and it was not pursued.
John Yang
[10] Mr. Yang obtained a PhD in physical chemistry in 1996 in Melbourne, Australia. He moved to Canada in 1997. He did not work in the field of his professional training rather went into business. In 1997, he opened the Newfoundland Pub in Ottawa and sold it three years later. Ms. Anderson acted for the purchaser in this transaction. Later, Mr. Yang retained her. She acted for him on numerous occasions including a residential real estate sale and purchase and a variety of commercial transactions.
[11] Ms. Anderson qualified as lawyer in Beijing. She came to Canada in 1985 and earned a Masters of Law degree at the University of Saskatchewan. She then worked with a law firm in Vancouver for number of years as a legal assistant and eventually returned to law school. She graduated in 1992 and was called to the Ontario bar in 1994. Since then, she has practised in Ottawa as a sole practitioner in general practice with about 65 percent of her work being in real-estate and corporate business purchases.
[12] Ms. Anderson acted for Mr. Yang when he purchased a restaurant in Manotick and when he subsequently purchased the building in which it was located. The vendor told Mr. Yang the property was contaminated. He mentioned a gas station across the street. He told Mr. Yang that if he wanted an environmental report, he would not sell to him. Mr. Yang spoke to other owners in the area and decided the contamination would not affect his business. He had been told at the bank that he would not get financing without an environmental report but he was able to borrow elsewhere.
[13] Ms. Anderson explained the importance of an environmental assessment to him with respect to this purchase, but he told her that he had worked it out with the vendor in the price.
[14] When Mr. Yang sold this property, he told the purchaser what he had been told and took back a mortgage, as requested, in order to facilitate the sale.
[15] Mr. Yang owned other pubs and restaurants. He was very active in pursuing business opportunities. Ms. Anderson assisted him in many transactions that did not come to fruition. Mr. Yang would come in on short notice to request her to draft purchase and sale agreements for a variety of businesses. Many times, she would not hear back from Mr. Yang because his offers had not been accepted. Examples included a motel with a pub, two well-established pub style restaurants in Ottawa and a golf course which included a pub and restaurant.
Mr. Yang offers to buy the Baxter Property
[16] Mr. Yang heard from a customer that the Baxter Plaza might be for sale. It is unclear whether this customer was or was not a real estate agent but in any event, Mr. Yang says the customer told him Baxter was worth between $2 million to $2.2 million. Mr. Yang drove over. He saw the For Sale sign. He did not contact the agent but started going to Sonny’s Bar and Grill (“Sonny’s”) located in the Plaza at various times over the summer of 2005. He wanted to assess the level of business. Eventually, he asked to meet the owner and was directed to Mr. Sumra. The second time they met, Mr. Yang told Mr. Sumra that he was interested in buying the restaurant and the building.
[17] Mr. Yang testified he heard rumours from other customers of Sonny’s that the land was contaminated and that people had been around drilling holes. He asked Mr. Sumra about this. He testified Mr. Sumra told him it was not true, not to listen to these people, they were just jealous. Mr. Yang says he did not see any signs of drilling or drill holes, although he did not actually look. He testified that he told Mr. Sumra people were saying the drilling was recent but Mr. Sumra told him those were someone else’s holes.
[18] Mr. Yang testified he took what he heard as just rumour. He thought “talk is cheap”. He did not ask Mr. Sumra to show him any “paper” on the site condition.
[19] Sometime in November, Mr. Yang says he asked Mr. Sumra for the rental rolls and leases. Mr. Sumra provided these to him in a folder. Mr. Yang testified there were no environmental reports in the folder. He also testified he never asked Mr. Sumra what he wanted for the property or what the list price had been. Mr. Yang says he did ask him about the For Sale sign. According to Mr. Yang, Mr. Sumra said “you go with me; if an agent ever calls you, don’t answer”. Mr. Yang agreed.
[20] Using income information, his own experience and a multiplier, Mr. Yang said he worked out that Sonny’s Bar and Grill was worth $150,000. He did not tell this to Mr. Sumra. He testified that he had no clue what the building was worth but decided to offer $1.8 million for both to “give them a number they would like”. At this point, Mr. Sumra told him his son owned Sonny’s and wanted $250,000 for it. Mr. Yang agreed because it did not change the overall price. He also testified he told Mr. Sumra that his offer was conditional upon getting an appraisal “to see if the price was right”.
[21] Mr. Yang then contacted Ms. Anderson to draw up a purchase and sale agreement. He did not tell her the offer was conditional on an appraisal. He did tell her the total price was $1.8 million of which Sonny’s Bar and Grill was $250,000. This was November 16, 2005 and was their first contact in relation to Baxter Road. Ms. Anderson drew one agreement for the business and another for the real estate. The next morning Mr. Yang attended in her office. They reviewed both documents in detail. Ms. Anderson testified she went through all the conditions in Schedule A with him because, to her knowledge, it was his first strip mall purchase.
[22] Mr. Yang left with copies. The next Ms. Anderson heard from him was on November 21, 2005. He called to say the agreement was signed. He brought a signed copy to her office with $22,500 in cash so she could write the deposit cheque.
[23] Ms. Anderson was adamant Mr. Yang knew and understood that the conditions were for him to handle, not her. She said this was always her practice unless the client specifically asked her to do it. He did not ask her to. She maintains that the modest fees quoted in relation to the value of the transaction are consistent with the client handling the conditions.
[24] Ms. Anderson did not have any written note or record to confirm that she had told Mr. Yang he was responsible for the conditions. She does use a standard checklist for real-estate closings. The one created when this file was opened showed the various steps to be taken and checked off when completed. The requirement for environmental protection and all the other “off title searches” had a line drawn through them. Ms. Anderson testified that this meant her client had told her she was not to make those inquiries on his behalf. In terms of the environmental condition, she testified this specifically meant he would be looking after it, not her.
[25] Mr. Yang disagrees. He testified that in terms of the environmental condition, he thought that if there were any existing reports, Ms. Anderson should get them.
[26] Mr. Yang denies Mr. Sumra ever gave him any environmental reports. He testified he never saw the Paterson reports until after this litigation commenced. He also testified that the first time he saw the AMEC report was in Ms. Anderson’s office on January 17, 2006.
Mr. Sumra’s Version of these Events
[27] Mr. Sumra was born in India. He graduated university with a B.A. degree. He moved to England in 1962 and from there to Canada in 1991. He had a number of shops in England and was looking for something along those lines in Ottawa. In 1994, he retained lawyer Michael Carey to handle the purchase of a Treat’s franchise. Mr. Carey has been his solicitor since.
[28] In 1996, Mr. Sumra began looking for another property. He found the Baxter Road plaza and was able to buy it the following year. There were no environmental requirements at that time. The restaurant in the plaza was taken over by his son in 2001, and became Sonny’s Bar and Grill.
[29] In 2005, Mr. Sumra decided to sell Baxter Road to go in on a larger property with some friends. After the two offers fell through, Mr. Sumra and his son attended a meeting at Paterson Group. Various recommendations to remediate the property were discussed. The cost was in the range of $100,000 to $150,000. The impression Mr. Sumra left the meeting with was there was no guaranteed outcome from this expenditure, the contamination was not a hazard to people and would eventually go away on its own. He decided to think it over and had not taken any steps when Mr. Yang started coming to Sonny’s.
[30] Mr. Sumra said the first time Mr. Yang spoke to him was to express interest in Sonny’s Bar and Grill. He says he told him he would speak to his son and did so. The next time he saw Mr. Yang, he told him Sonny wanted $250,000. Mr. Sumra testified Mr. Yang did ask what he wanted and he told him $2 million for both. He says Mr. Yang replied it was only worth $1.8 million. Mr. Sumra accepted. Mr. Yang said he would have his lawyer draw up the papers.
[31] Mr. Sumra testified Mr. Abraham had given him a folder containing all the relevant information he would have to give to a prospective purchaser. The folder included the leases, property tax information, the AMEC report and the two Paterson reports. Mr. Sumra’s testimony was that Mr. Yang brought the purchase and sale agreements to Sonny’s on November 21, 2005. He says he gave Mr. Yang the folder that same day, before they went to Mr. Carey’s office where they both signed the agreements. Mr. Sumra also testified nobody could miss seeing the drill holes and that he specifically pointed out to Mr. Yang. Mr. Sumra also testified he told Mr. Yang the environmental reports basically said “the soil is okay but the water is not.”
[32] According to Mr. Sumra, when he drew Mr. Yang’s attention to the environmental issue, Mr. Yang said he had heard a rumour to that effect, and would take everything to his lawyer. Mr. Sumra also said he told Mr. Carey when he was leaving his office that he had given all of the reports to Mr. Yang.
[33] Mr. Sumra was cross-examined with reference to answers given at his Examination for Discovery. Although the questions and answers are not without ambiguity, the suggestion is he may have changed his testimony about when he gave the three environmental reports to Mr. Yang. At discovery, he was asked whether this occurred when they reached the oral agreement or when they signed the written agreements. Ultimately, at discovery, Mr. Sumra testified he could not remember how long it was before or in relation to when they signed the agreements, but that it was before the signing. This testimony does contrast with his clear trial testimony that he gave the file folder to Mr. Yang on November 21 before they went to Mr. Carey’s office to sign the agreements.
The Environmental Condition
[34] Schedule A to the real estate Agreement of Purchase and Sale (“PSA”) contained this environmental condition:
This Offer is conditional upon the Buyer determining, at the Buyer’s own expense: that: all environmental laws and regulations have been complied with, no hazardous conditions or substances exist on the land, no limitations or restrictions affecting the continued use of the property exist, other than those specifically provided for herein, no pending litigation respecting Environmental matters, no outstanding Ministry of Environment Orders, investigation, charges or prosecutions respecting Environmental matters exist, there has been no prior use as a waste disposal site, and all applicable licenses are in force. The Seller agrees to provide to the Buyer upon request, all documents, records and reports relating to environmental matters in possession of the Seller. The Seller further authorizes listing agent, to release to the Buyer, the Buyer’s Agent or Solicitor, any and all information that maybe on record in the Ministry office with respect to the sold property. Unless the Buyer gives notice in writing delivered to the Seller not later than 8:00 p.m. on the 26th day of November, 2005, that the preceding condition has been fulfilled, this Offer shall become null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein.
[35] Ms. Anderson testified she reviewed this condition with Mr. Yang when she went over the draft agreement with him and again when he returned the signed agreement to her. Ms. Anderson says she explained the environmental condition was in two parts and that her preference was always for her client to get his own environmental assessment because he would then have a warranty. She was not told whether the vendor had any existing reports but explained that, regardless, Mr. Yang could only rely on anything given by the vendor at his own risk. She also told him, which he already knew, that he would need an environmental report to get bank financing.
[36] When Mr. Yang came in with the signed agreement, Ms. Anderson says she pointed out to him all the work that had to be done in only five days with respect to the Schedule A conditions. Her testimony is she made it clear to him that he was responsible for completing the conditions. She says she provided some additional explanations, as she thought necessary with respect to obtaining financing, insurance and the need to get a licensed inspector.
[37] Her testimony was that Mr. Yang said he would take care of the conditions. Her understanding was if he encountered any problems, he would let her know.
[38] Ms. Anderson agreed Mr. Yang told her about the rumour he had heard that the land may be polluted. She asked him about the rumour. He said there may have been a gas station or dry cleaner in the area. Her response was to reiterate the importance of the environmental condition. She also says she asked him if he knew why the vendor was selling. She says Mr. Yang thought he may be planning to go back to his own country. Ms. Anderson’s response was to tell him again to get his own environmental report so he would know the condition of the property right away.
[39] Mr. Yang agreed Ms. Anderson went over the agreement with him and what needed to be done. His testimony was he would look after the conditions for financing, insurance and inspection but the environmental condition was up to Ms. Anderson. To him, the environmental condition meant that if there was any report on the building about an environmental issue, he should have it. He understood Ms. Anderson would get any existing environmental reports on the building. He agrees he did not specifically ask her to get existing reports from the vendor, but nor did she tell him to do it. Mr. Yang acknowledges he knew he could get his own report. He was not expecting Ms. Anderson to arrange for an environmental inspection. He knew if that step were to be taken, it would only be on his express instructions.
[40] Mr. Yang testified that, despite the rumours of contamination, he did not ask Mr. Sumra for any reports he may have nor direct Ms. Anderson to do so because, as he stated repeatedly, “it’s not my job”.
[41] In point of fact, neither Ms. Anderson nor Mr. Yang asked the vendor to provide any environmental reports. All three reports were in Mr. Carey’s file and available for production, if requested.
The Appraisal
[42] Mr. Yang picked November 26 as the date by which he either had to obtain financing or waive the condition. He said he had not done anything about financing before signing the agreements. Mr. Yang says he asked Mr. Surma right after signing, “how can we get the money?” He says Mr. Sumra asked what he would need. Mr. Yang then queried could he take over his existing mortgage and a vendor take-back mortgage for the balance. Mr. Yang said this was acceptable to Mr. Sumra provided his mortgagee agreed. Mr. Sumra was aware, in that event, he would remain liable on the existing mortgage.
[43] Mr. Yang says he talked to the CIBC about financing on November 22. He knew he would need an appraisal for bank financing. Mr. Yang hired Steve Harman to do it. Mr. Harman came to the site on November 23. Mr. Yang told Mr. Harman he needed to know the value before the December 8 closing date, because he had to “pick out the price”. Mr. Yang says this is the real reason he wanted an appraisal. Mr. Harman agreed to try to get a verbal for Mr. Yang within that timeframe but told him the complete report would not be ready for two or three weeks.
[44] Mr. Yang says he called Mr. Harman on about December 3 or 4 and was told the property was worth about $1,450,000. This same week, Mr. Yang says he “dug out” the previous listing price. With this information in hand, he decided to meet with Mr. Sumra about the price.
[45] Mr. Harman’s report dated December 16, 2005 is addressed to Mr. Yang and states the intended use of the appraisal is to provide the purchaser with an estimate of current market value for financing purposes. Page one of the report sets out:
There were no signs of any hazardous or toxic substances on site, on the day of inspection. No environmental and soil tests were provided for the subject in order to determine if any contamination was on site and if the load-bearing capabilities of the site are adequate for development. A detailed soil analysis would be required to make a final determination. ... A Phase I environmental report was provided (prepared by amec) and dated November 21, 2003, and indicates “No further investigations are necessary”.
[46] Mr. Yang’s testimony was that he had “no clue” how Mr. Harman came to have the AMEC report. He testified he did not give it to him. Mr. Harman was not sure from whom he received the report. He testified he thought it came from the listing agent, but he also testified he knew Mr. Abraham and that he would have had to give him all the reports he had, not just one of them. Mr. Harman also testified he asked Mr. Yang to give him any reports in his possession and that it was possible he got the AMEC report from him.
[47] I find Mr. Harman did not receive the AMEC report from Mr. Abraham. Mr. Abraham had acted correctly in relation to the contamination issue, making sure the issue was brought to the attention of the second offeror and making sure to tell Mr. Sumra both Paterson reports must be provided to any prospective purchaser. Mr. Abraham was not asked whether he gave the AMEC report to Mr. Harman. He also testified he had not heard anything about the Yang/Sumra transaction until after it closed. I accept his testimony and I conclude that he did not give the AMEC report to Mr. Harman.
[48] Ms. Anderson did not retain Mr. Harman to do the appraisal; she did not know he had been retained by Mr. Yang. She said she did not send him a copy of the AMEC report. I accept her testimony and find Mr. Harman did not get the AMEC report from her.
[49] Mr. Sumra did not know anything about the Harman appraisal. Mr. Yang did not tell him about it or give him a copy of it. I find it was not Mr. Sumra who provided Mr. Harman with the AMEC report.
The Conditions are waived
[50] Mr. Yang testified he was not too concerned about meeting the November 26 date for waiving conditions. On November 30, Mr. Carey called Ms. Anderson and imposed a final deadline of 4:00 o’clock that day. Her note shows the call came in at 11.05 in the morning and she was on the phone with Mr. Yang at 11.35 a.m. He came in to her office to review the conditions.
[51] In addition to her dated file notes for November 30, which commence with Mr. Carey’s phone call, Ms. Anderson had another note which is not dated. It is on smaller, lined paper. She described it as a sticky note she placed on the documents Mr. Yang brought in with him that day. Her note reflects that Mr. Yang brought in some but not all of the leases; two were missing, the 2005 property tax information and the complete list of rents and operating costs. Her note also states this: “2003. Nov. Environmental Phase I report (conclusion = ok.).”
[52] Ms. Anderson did not believe she was given a copy of a report on November 30. She testified when Mr. Yang told her about it, she told him that even still, he should get his own report and that once he had waived the environmental condition, he could never come back on it again.
[53] Mr. Yang also gave her an additional instruction on financing, namely that he wanted an option so that if he could obtain a better mortgage, he would not have to assume the vendor’s. He also told her he had not had the inspection done yet. Ms. Anderson says, pursuant to her client’s instructions, she wrote to Mr. Carey on November 30 waiving all conditions with a few changes to the financing and still subject to inspection. She also proposed a postponement to the closing date for the commercial real estate but to maintain the December 8 closing for the business.
[54] The next day, Mr. Yang advised Ms. Anderson the inspection had been done and to waive that condition too. By now, Mr. Carey had agreed to the other changes she had proposed with the stipulation that $100,000 of the vendor take-back mortgage would be repaid within 30 days of closing and for an additional $50,000 non-refundable deposit towards the commercial transaction.
The Price is reduced
[55] On December 3 or 4, Mr. Yang called Mr. Sumra and asked for a meeting. Mr. Yang testified he had decided he would only pay $1.6 million. Mr. Yang’s reasoning was he had the verbal report from Mr. Harman and the former list price, both at $1,450,000, he had always thought Sonny’s was only worth $150,000, so that was what he was prepared to pay. Mr. Yang says at the meeting, he simply stated his price and gave no reasons for the reduction. He did not bring up the appraisal or the previous list price. He had decided they would either take his price or he would not close and was prepared to lose his deposit. According to Mr. Yang, Mr. Sumra and his son spoke to each other in their own language and then accepted the price reduction.
[56] Mr. Yang called his lawyer on Monday, December 5 and told her the price had changed to $1.6 million. He did not give her an explanation for the reduction. She assumed the reduction may have been on account of changes in the financing in that she was also instructed the vendor take-back was reduced by $200,000, of which $100,000 was repayable within 30 days of closing.
[57] Mr. Yang testified he brought someone to the meeting with him in case he had trouble understanding Mr. Sumra’s accent. He introduced the man as his cousin, but readily acknowledges this was not true. In fact, the man was Mr. Seena. Through a subsequent witness, it was learned Mr. Seena was a real estate agent at Cancorp Realty Inc.
[58] Mr. Sumra came to the meeting with his son of Sonny’s Bar and Grill. They both confirmed Mr. Yang introduced Mr. Seena as his cousin. Sonny thought he looked familiar and afterwards checked the Cancorp site and identified Mr. Seena as an agent for Cancorp. Both Sumra’s testified Mr. Yang came right out and said he wanted $200,000 off the price because of the contamination report. Mr. Sumra tried to negotiate a lesser reduction but Mr. Yang was firm and the $200,000 reduction was accepted. Mr. Yang made no mention of the appraisal of the property or of his view that Sonny’s was only worth $150,000.
[59] Sonny Sumra testified he heard Mr. Seena mention the possibility of the contamination migrating to the residential houses behind the plaza. He says he heard Mr. Yang say he didn’t care, he would buy them too. He found this very odd.
[60] Mr. Sumra testified he called Mr. Carey to say Mr. Yang had demanded a reduction because of the contamination, and he had agreed to the new price.
[61] Mr. Yang denied that he had any knowledge at this point of the contamination. He said he had not seen any of the three reports, including the Paterson report that set out the remediation budget of $100,000 to $150,000.
CIBC Financing
[62] It is undisputed that on December 2, 2005, the AMEC report was faxed from Ms. Anderson’s office to CIBC. There was no covering letter.
[63] Initially, Ms. Anderson thought she must have received the AMEC report when Mr. Yang brought Steve Oremush to her office on December 6. Mr. Oremush was a business development officer for commercial mortgages with CIBC. Mr. Yang and Ms. Anderson both agree he and Mr. Oremush came to her office on December 6 on short notice to discuss the CIBC financing.
[64] In reviewing her file before testifying at trial, Ms. Anderson noticed the fax line dated December 2 and her note dated December 6 of her meeting with Mr. Yang and Mr. Oremush. It was obvious that the AMEC report must have been in her office on December 2. At this point, which I am advised by counsel was after Mr. Yang had testified and before she took the stand, Ms. Anderson recalled another unscheduled meeting when Mr. Yang brought Mr. Seena to her office on December 2. She testified she now recalled that this was when the AMEC report was brought to her and she was asked to fax it out.
[65] Mr. Yang was not called back to the stand to reply to this testimony. Nor did he tender Mr. Seena as a witness in reply.
[66] Mr. Yang had been questioned about whether he had brought the AMEC report to Ms. Anderson on December 6. His answer was, “impossible!” He was asked whether he had faxed it to her, and denied by asking: “Where? When?” He was asked if Mr. Sumra had given all three reports to him and answered: “Impossible!” At trial, he was adamant he had never seen the AMEC report until January 17, 2006 in Ms. Anderson’s office.
[67] In his Examination for Discovery, Mr. Yang testified he had only ever seen the AMEC report once and it was with Steve Oremush in Ms. Anderson’s office, on December 6.
[68] Mr. Oremush made a special request to CIBC adjudication department to waive the requirement of a transmittal/reliance letter from AMEC stating it is “common practice for firms not to provide Transmittal letters for E/A’s that are over 1 year old.” He went on to add the only option he was aware of would be to obtain a new ESA Phase I which would cost in excess of $1,500 to $2,000. The go ahead without the transmittal letter was provided on January 27, 2006.
The January 17, 2006 Waiver/Consent
[69] Mr. Yang attended Ms. Anderson’s office on January 17, 2006. She had prepared a document titled, “Waiver/Consent” from him and from 603 with respect to the purchase of Baxter Road. The document states:
I, John Yang, as the person authorized by 6038212 Canada Inc. which is the legal purchaser of the above noted transaction, and in my personal capacity as I have been the one who had arranged and had negotiated the deal to purchase the above noted property, hereby, confirm that my lawyer, Zheng Anderson, has advised me to do the environmental assessments as stated in the Agreement of Purchase and Sale. It is my decision not to do the assessments. I also confirm that I have instructed my lawyer not to order any new environmental reports as I already received one which has been accepted by the mortgage company. Further, it is my decision and instruction to my lawyer not to order special coverage for environmental concerns from title insurance company as the mortgage company does not require this coverage.
[70] Ms. Anderson testified that from the outset, she had told Mr. Yang to get his own environmental report. She said she told him this many times. She became worried he was not taking her advice. She decided she needed something in writing from him.
[71] Mr. Yang said, on arrival, he saw the AMEC report and the waiver on the table. He read the waiver. Ms. Anderson told him to get a new environmental report. She was concerned AMEC was an old report. He asked, “Why should I? I already have got the financing”. He testified he knew he could not get financing if there was an environmental problem and since the CIBC was lending him the money, his view was, “Why waste time and money on another one?”
[72] Mr. Yang also testified his understanding of the waiver was to acknowledge Ms. Anderson had advised him to get a new environmental report and he was declining to do so. He did not regard the waiver as relieving her from what he saw as her obligation to have obtained for him any existing environmental reports. He thought that if there were any bad reports against the building, he would already know. He did not ask her whether she had asked the vendor for any existing reports. He said he was not concerned because it was her job, not his.
[73] Ms. Anderson disagrees the AMEC report was out on the table when Mr. Yang came in on January 17. She denies even having it in the meeting room when they met. The file was not there, only the waiver.
The Closings
[74] The closing documents were signed at Ms. Anderson’s office. Mr. Yang signed as guarantor. His wife signed as President of 603 even though she was not. She also signed the necessary Statutory Declarations on behalf of the company. The declarations disavowed any knowledge of the presence of hazardous contaminants in or on the property. Mr. Sumra’s counsel suggested Mr. Yang may have had his wife sign the declarations, including the Environmental Compliance Declaration, because she lacked the knowledge he had of the actual contamination of the property.
[75] Mr. Yang testified they had intended to incorporate a separate company to take title to Baxter Road. His wife was going to be the President of the new company. However, this did not get done and in the end, he took title in 603.
[76] The intention to incorporate a new company is confirmed in two notes in Ms. Anderson’s file, one undated. I am satisfied by the explanation for the way in which the closing documents were signed on behalf of 603, confirmed by notes in Ms. Anderson’s file.
[77] The Sonny’s Bar and Grill purchase closed on time on December 8, 2005. The real estate purchase was postponed until the CIBC financing was available and closed on February 3, 2006.
Mr. Carey’s Testimony
[78] Michael Carey has been Mr. Sumra’s lawyer since the early 1990’s. He acted for Mr. Sumra when he purchased the Baxter Plaza and when he renewed his mortgage financing in 2003. Mr. Carey acted for Mr. Sumra and his son on the commercial and business sales to Mr. Yang.
[79] Mr. Carey had a copy of the AMEC report in his file in connection with the refinancing in 2003. He knew about both failed offers to purchase the commercial real estate. He retained copies of both Paterson reports in his file.
[80] Mr. Carey confirmed the environmental condition was not discussed with Mr. Yang and Mr. Sumra when they were in his office signing the agreements. He confirmed he was not asked by Mr. Yang or Ms. Anderson to produce any environmental reports and he did not produce them.
[81] Mr. Carey was directed to the environmental condition. He described it as a standard clause. He stated that on December 1, the last condition was waived, the deal was proceeding and only the details of the financing remained to be finalized. He later heard that the price had been reduced. No reasons were noted in his file. He could not add to his note.
[82] Mr. Carey’s independent recollection of the transactions was limited.
January 2008
[83] In January 2008, Mr. Yang received a telephone call from Ms. Anderson. She had received a letter from lawyers for an adjacent property owner stating that contamination from the Baxter Plaza had migrated to its property. Mr. Yang went to her office. He said she gave him the letter, said she was sorry and could not help him.
[84] Ms. Anderson confirmed that she contacted Mr. Yang as soon as she received this letter. She says she advised him she may be in conflict of interest and he should hire someone else.
[85] The adjacent owner sued. Parts of the ligation have been resolved, leaving only the case presently before the court for determination.
[86] Mr. Yang testified the first time he knew the land was contaminated was October 2009 when counsel provided him copies of the Paterson reports received in the course of the litigation.
[87] Mr. Yang retained Paterson Group at this point. He also had Mr. Harman do an up to date appraisal for him. As a result, he is advised the costs of remediation are $1.8 to $2.2 million and, once completed the market value of the property is $2.1 million. He testified he would never have purchased the property had he known of the contamination. He has not taken steps to fix the problem. He has no plans to re-develop the land.
[88] Mr. Yang had to repay the CIBC mortgage. He did but was unable to get bank financing. He has not actually lost any tenants or revenue to date, with the exception that he is holding one unit vacant rather than leasing it in case he might have to interrupt the tenancy to do remedial work and thereby incur business interruption liability to a tenant.
Credibility
[89] The credibility of each party has been called into question.
[90] The plaintiff submits Mr. Sumra had a strong financial motive not to provide him with the environmental reports, to misrepresent the condition of the site, and to mislead the court in his testimony. Mr. Sumra did not have any notes to confirm he did provide the environmental reports to Mr. Yang. There was an inconsistency between his testimony and his son’s as to which one of them had actually signed the agreement on behalf of Sonny’s. His trial testimony differed from his discovery as to when he gave the environmental reports to Mr. Yang.
[91] There is no denying Mr. Sumra had a strong financial motive to close the deal with Mr. Yang. He wanted to sell the commercial property. He had two failed deals on account of the environmental issue. He had a large mortgage outstanding on the property. He had not notified his bank of the contamination which entitled the bank to call the mortgage loan. He knew new bank financing would not be forthcoming until the land was remediated. The steps he took towards notifying residential neighbours about the possibility of migratory contamination amounted to a few “over the fence” discussions, and were inadequate to constitute proper notice.
[92] Plaintiff’s counsel also submits the corroboration provided for Mr. Sumra’s testimony from his son should be discounted. In addition to the natural ties between father and son, Sonny stood to gain $250,000 from the sale of his Bar and Grill and to secure his release as guarantor on his father’s mortgage.
[93] On the other hand, Mr. Sumra knew his lawyer had all three environmental reports. He knew the agreement allowed the purchaser to satisfy itself on environmental issues and to receive all of the environments reports on request. Mr. Sumra agreed when asked by Mr. Yang to cooperate in his assumption of his existing mortgage and to provide a vendor take-back mortgage for the balance needed to close. In these circumstances, Mr. Sumra knew he would still be liable for $1 million dollars of financing on the Baxter Road property. In my view, these facts are consistent with the reliability of Mr. Sumra’s testimony.
[94] Ms. Anderson testified at her Examination for Discovery that she received the AMEC report on December 6 when Mr. Yang and Mr. Oremush attended in her office. This testimony was clearly in error because there is no doubt the report had been in her office on December 2. In my view, this error does not go to credibility.
[95] Plaintiff’s counsel questioned the veracity of Ms. Anderson’s late coming recollection of an unscheduled meeting with Mr. Yang and Mr. Seena on December 2. Neither Mr. Yang nor Mr. Seena was called to reply to it. Her recollection, while late coming, was uncontradicted.
[96] Plaintiff’s counsel advised in submissions that in response to an undertaking given by the plaintiff, Mr. Seena’s name and contact information were provided and defendants’ counsel were advised Mr. Seena had no recollection of the December meeting where the purchase price was reduced. That issue is separate from Ms. Anderson’s testimony about the December 2 meeting. It does not explain the absence of any reply to it.
[97] At his Examination for Discovery, Mr. Yang testified that he only ever saw the AMEC report on December 6 when he was with Mr. Oremush of CIBC in Ms. Anderson’s office. He flatly denied that at trial. In his trial testimony, he stated that the first and only time he saw the AMEC report was on January 17, 2006 in Ms. Anderson’s office.
[98] Mr. Yang’s question to Mr. Sumra after the agreements were signed, about where they would get the money to close the transaction, is consistent with knowing about the environmental reports. Mr. Yang knew from his previous experience that without a good environmental report, he would need private financing.
[99] Mr. Yang had no explanation as to how his lawyer and real estate appraiser came to be in possession of the AMEC report. He implied that he only knew CIBC got the report from his lawyer because he had seen the fax transmission. His testimony essentially asks the court to accept the coincidence that whereas his lawyer, appraiser and banker all had the AMEC report, Mr. Yang did not give it to any of them. This is difficult to believe.
[100] I accept the accuracy of Ms. Anderson’s undated note, made on November 30, 2005, that Mr. Yang told her he had a Phase I Environmental Report and the conclusion was “ok”. Clearly, this is a reference to the AMEC report. This was also the same day Mr. Yang modified his instructions to her, to provide an option for him to obtain his own mortgage financing in lieu of the arrangements he had previously discussed with Mr. Sumra.
[101] The evidentiary record permits only one source from whom he could have obtained the AMEC report. It is Mr. Sumra, who testified he gave it and the two Paterson reports to Mr. Yang at the same time. There is no allegation Mr. Sumra only gave Mr. Yang the AMEC report. I find Mr. Yang received the AMEC Report and the Paterson reports from Mr. Sumra. I find he had them all on November 30 when he advised his lawyer only about the “favourable” report.
[102] The conclusion that Mr. Yang had the AMEC report by November 30 is also consistent with the known fact that it was in his lawyer’s office on December 2.
[103] Mr. Yang’s description of the meeting where the price was reduced is improbable. He had testified Mr. Sumra knew the price was conditional upon an appraisal, but he did not mention the verbal appraisal to him. He says, in his mind, Sonny’s was only worth $150,000 but he never mentioned this figure to Mr. Sumra. He asks the court to believe he simply told Mr. Sumra he would only pay $1.6 million dollars and Mr. Sumra agreed. The inference the court is asked to draw is that the Sumra’s discussed the contamination issue in their own language and decided to take the reduction without remonstrance or negotiation rather than lose the deal.
[104] Mr. Yang’s counsel submits that there would have been no need for him to explain the price reduction because Mr. Sumra would know his previous list price. This is true, but adjusting for that alone would equal $1.7 million dollars. There was no way Mr. Sumra could factor in Mr. Yang’s unspoken opinion of what Sonny’s was actually worth because he had never heard this figure from Mr. Yang. The price of Sonny’s had never been in issue between them.
[105] It is much more likely, as the Sumra’s state, that Mr. Yang asked for the reduction on account of the contamination. Mr. Sumra testified he did try to negotiate with Mr. Yang to keep the reduction in line with the range of $100,000 to $150,000 set out in the Paterson report, but that Mr. Yang would not budge.
[106] On behalf of Mr. Yang, his counsel submits that no one would risk so much money on contaminated property. I am satisfied that Mr. Yang was content to proceed by securing a price reduction in excess of the “discussion purpose” estimated cost of remediation in the Paterson report. By his own testimony, he offered Mr. Sumra $1.8 million dollars without even inquiring what the list price had been. He says he heard a lot of rumours about contamination and drilling on the property but never looked for drill holes and was content to rely on a 2003 report despite his lawyer’s advice to get an up to date report. He testified he made no inquiries about financing the purchase until after he had signed the agreement. Mr. Yang was not a cautious purchaser.
[107] I also find that Mr. Yang was well aware he was responsible to fulfill the conditions for the commercial real estate purchase. It is true Ms. Anderson did not have notes to confirm this. The fact is Mr. Yang agrees he was responsible for the conditions with respect to financing, insurance, inspection, obtaining leases and rent rolls from the vendor. He also testified he knew it would be up to him, not her, to arrange for any new environmental report he might decide to obtain. He says he assumed Ms. Anderson would look after the part of the environmental condition as to obtaining any existing reports from the vendor, although he did not ask her to do so. I find it odd that of all the conditions, only one part of one condition would be the lawyer’s responsibility. I prefer Ms. Anderson’s testimony that it was understood between them Mr. Yang was responsible for the condition; in particular, the responsibilities under the environmental condition were not divided up between them.
[108] On the central issues of disputed fact, I find that Mr. Sumra did give the three environmental reports to Mr. Yang on or before November 30. Mr. Yang had the Paterson Phase I and II reports when he instructed Ms. Anderson to waive the environmental condition. These findings result in the dismissal of the case against Mr. Sumra and 123.
The Real Estate Experts
[109] The plaintiff retained Sybil Johnson-Abbott to provide an opinion as to whether or not Ms. Anderson met the standard of care of a reasonably competent solicitor in relation to the purchase of the commercial real estate. Ms. Johnson-Abbott was called to the bar of Ontario in 2002. She practices in the areas of real estate and business transactions. She is a partner at Borden Ladner Gervais.
[110] Ms. Johnson-Abbott provided two reports. Her first report is dated April 23, 2010. In it, she concludes Ms. Anderson was below standard because she did not request environmental reports from the vendor prior to waiving the environmental condition and did not discuss with the purchaser the possibility of there being contamination on site and what the purchaser might have been able to do by way of investigation prior to waiving the environmental condition.
[111] In the second report dated June 15, 2012, she opined that Ms. Anderson was also below standard in the way she drafted the environmental condition. It did not appear that Ms. Johnson-Abbott turned her mind to this aspect of the case in her first report. Ms. Johnson-Abbott concluded Ms. Anderson ought to have drafted the clause to require the vendor to deliver all environmental reports in his possession and control, and to include a vendor’s representation and warranty that there was no environmental contamination on the property.
[112] Ms. Johnson-Abbott formulated her opinions based on facts provided to her by plaintiff’s counsel. These included a number of facts that were incorrect:
• Mr. Yang’s wife is the president of 6038212 Canada Inc. although Mr. Yang is a director and has authority to bind 6038212 Canada Inc;
• The Property included at least one dry cleaning operation, a well known indicator to the profession of potential site contamination;
• Mr. Yang indicates that Ms. Anderson was not authorised to waive any conditions because the appraisal for the Property had not yet been delivered;
• There is no copy of the AMEC Report in Ms. Anderson’s file and no cover letter. It is not known where Ms. Anderson obtained the Report. It did not come from Mr. Yang;
• The Agreement was amended to provide a reduction in the purchase price from $1,800.000.00 to $1,600,000.00 on December 5, 2005 as a result of a verbal appraisal which was delivered to Mr. Yang on that date;
• On January 17, 2006, Mr. Yang attended Ms. Anderson’s office and Ms. Anderson had Mr. Yang sign a waiver waiving any liability against her for not ordering new environmental appraisals and acknowledging that she had advised Mr. Yang to order them. In addition, Ms. Anderson confirmed that she had disclosed the AMEC Report to him and that CIBC was relying on the report. Mr. Yang indicates that he was not shown any report and was not aware that he was not entitled to rely upon the Report;
• The discussion about the environmental condition of the property on January 17, 2006 involved Mr. Yang further advising Ms. Anderson about the rumour of the contamination at the Property. Ms. Anderson assured him that the Report was satisfactory but did not show him the Report and advised that there was no problem in particular because CIBC had accepted the Report;
• Mr. Yang denies that Ms. Anderson advised him to order new reports and there was no discussion of ordering any new reports.
[113] Ms. Johnson-Abbott also noted in particular that Mr. Yang requested Ms. Anderson to do appropriate environmental searches.
[114] Contrary to what Ms. Johnson-Abbott was told, Mr. Yang’s wife was not the President of 603. There was no dry cleaning operation on site at the time of Ms. Anderson’s retainer. Ms. Johnson-Abbott explained that she knew this to be an historical reference, but she did not explain how that related to Ms. Anderson’s knowledge at the relevant time. Ms. Anderson was authorized to waive the conditions on November 30 and December 1, before even the verbal appraisal had been received. The price reduction was not negotiated as a result of the verbal appraisal. There was a copy of the AMEC report in Ms. Anderson’s file. On January 17, it was Mr. Yang who referred to the AMEC report as the reason why he was not accepting her advice to obtain his own environmental report. Ms. Anderson never assured Mr. Yang that the AMEC report was satisfactory. Mr. Yang acknowledged that Ms. Anderson advised him to obtain a new report.
[115] Mr. Yang has also acknowledged that he did not ask Ms. Anderson to undertake environmental searches.
[116] Ms. Anderson did discuss the possibility of onsite contamination with Mr. Yang and what he might be able to do about it prior to waiving the environmental condition. She specifically advised him to obtain his own current environmental assessment.
[117] In my view, the inaccuracies in the material facts provided to Ms. Johnson-Abbott significantly effect the weight to be given to her opinion even before taking my fact findings into account. My finding that Mr. Yang actually had the Paterson Phase I and II reports when he instructed Ms. Anderson to waive the environmental condition renders Ms. Johnson-Abbott’s opinion inapplicable on the facts of the case.
[118] Ms. Anderson called Sally Burks to provide opinion evidence on her behalf. She was called to the bar of Ontario in 1992. Prior to that, she was employed for more than 20 years as real estate clerk with an Ottawa law firm. After her call, she practised in her own firm in the areas of commercial and residential real estate. She has continued that practice with Perley-Robertson, Hill & McDougall from 2000 to date.
[119] In addition to her practice, Ms. Burks has many professional activities related to establishing Law Society real estate practice guidelines, Law Society standards for solicitor competency in real estate, and Law Society requirements for qualification as a specialist in real estate. She has chaired the County of Carleton Law Association Real Estate Committee from 2003 to 2011.
[120] In order to prepare her opinion, Ms. Burks reviewed all of the documents produced in Ms. Anderson’s Affidavit of Documents which included all the material from her file, and the transcripts of the Examinations for Discovery of Ms. Anderson, Mr. Yang and Mr. Sumra. She was not provided with assumed facts to rely upon.
[121] Ms. Burks’ opinion was that Ms. Anderson met the standard of care based on the instructions she had from the client. She testified that it was in accordance with the usual practice for a commercial real estate lawyer to advise the client that she would not start work until he had completed the work to satisfy the conditions and communicated this to her.
[122] She also testified that the decision whether to proceed with the transaction, having regard to the environmental information on hand, was a business decision for Mr. Yang not a matter for a legal opinion or decision from his lawyer.
[123] Ms. Burks’ opinion is consistent with the facts as I have found them; namely, that Mr. Yang knew he was responsible to look after the environmental condition and had obtained the existing reports from the vendor when he instructed Ms. Anderson to waive it.
[124] I find that based on the instructions she had, Ms. Anderson met the applicable standard of care. The case against her is dismissed. Although it would have been preferable to have written instructions or written confirmation of them, it is not required: see Victoria & Grey Trust Co. v. Apple, 32 R.P.R. 230, 1984 CarswellOnt 584 (Ont. H.Ct.J.) and Broesky v. Lüst, 2011 ONSC 167, 330 D.L.R. (4th) 259 (Ont. Sup. Ct.).
The Environmental Reports
[125] Paterson completed the Phase I and II reports in June and August 2005 already noted in connection to the two failed offers to purchase Baxter Road. Noting that several remediation options may be available depending on time and budget constraints, the August report recommended a remediation program to deal with the contaminated groundwater:
• Carry out a camera and video inspection of the subfloor piping to determine if a potential source of soil contamination exists;
• If the source is located, remove any PCE impacted soil and dispose offsite at an approved waste disposal facility. Any significantly impacted groundwater at the source should be pumped by an MOE licensed contractor and disposed off-site;
• The pump and treat system should be operated until the bulk of the groundwater contamination has been recovered;
• Natural attenuation can then be recommended to deal with the balance of the impacted groundwater;
• Existing monitoring wells would be used to monitor the progress of the remediation program;
• From a cost perspective, it is not possible to accurately determine the remedial costs. However, for discussion purposes, a budget of $100,000 to $150,000 is suggested.
[126] In short form, the recommendation was partial soil removal combined with a pump and treat system and ongoing monitoring while natural attenuation continued.
[127] Mr. Yang retained Paterson after the adjacent property owner sued him for migratory contamination. Several reports were prepared by Carlos da Silva for Paterson. He is a professional engineer and an expert in remediation of contaminated commercial land. Mr. da Silva provided opinion evidence at trial for the plaintiff.
[128] Mr. da Silva had reports prepared by Pinchin Environmental for the adjacent land owner. He reviewed all of analytical testing done and concluded in his reports dated January 25 and 27, 2010 that the PCE concentrations in the groundwater have been decreasing significantly over time due to natural attenuation processes, however still exceeded MOE standards in the area of two drill holes.
[129] A number of remedial options were reviewed to deal with the contaminated groundwater. Again, the report indicated the remedial action plan to be selected would be based on the timeframe available for completion, and cost.
[130] Three options were described. The first was natural attenuation and semi-annual sampling of existing monitoring wells to confirm the effectiveness of the approach. This would be the least expensive approach and would likely require five to 10 years to achieve PCE levels in compliance with current MOE standards. No cost estimate was provided.
[131] The second option was in-situ groundwater remediation consisting of an injection of potassium permanganate into as many as ten injection wells installed in close proximity to the identified contamination plume. By reason of the observed rapid decrease in PCE levels to this date by natural attenuation, it was expected that one injection would suffice. Sampling would be carried out on a semi-annual basis to confirm the effectiveness of the injection program. The timeframe would be approximately one to three years. Based on a three year timeframe, the cost was estimated at $60,000 to $70,000.
[132] The final option was a pump and treat system. Two recovery wells would be installed. A pumping system would extract the groundwater and direct it to an automated treatment system within the building. Treated water could then be discharged into the sewer system presumably after verification of successful treatment. Sampling would continue quarterly and one to three years remediation timeframe was expected. Based on a three year time frame, the estimated cost was $240,000 to $265,000.
[133] No steps were taken by Mr. Yang to proceed with any of these options.
[134] The next Paterson report is dated May 6, 2011. It is premised upon “proposed commercial development” which is not further described. The approach recommended is known as “dig and dump”. The building is left in place, but the foundation is underpinned to facilitate excavation to a depth of 5 metres below floor elevation. The estimated cost was $1.7 million dollars.
[135] This is considered an aggressive approach designed to get the property to standard immediately upon completion. It is considered “generic” because any possibly impacted soil is removed without further investigation being done to identify the specific location of actually impacted soil.
[136] The final Paterson report is dated December 21, 2012. Some of the existing wells had been resampled for groundwater. In 2009, MOE had issued more stringent standards for allowable concentrations of PCE. The 2012 analytical results showed PCE concentrations exceeding the MOE standards at several locations on the site. The indication was that significant natural degradation of the PCE was not currently occurring. The fluctuations in the groundwater concentrations were indicative that the source of the contamination was likely still somewhere in the soil, but at a location as yet unknown.
[137] Two options were now considered for remedial action. The first was the in-situ injection method. It was estimated that 17 injection wells and 5 injection events could be required. The cost estimate was approximately $300,000. The increase was on account of the increased PCE concentration in some locations in contrast to the sampling reported in the 2010 report which had shown significant reductions.
[138] The “dig and dump” method was again recommended in the event of redevelopment of the site. Depending on the depth of underground parking, this cost was estimated at $1.8 million to $2.2 million dollars.
[139] Mr. da Silva testified that an important factor to the choice of clean up approach was the length of time available. An approaching sale, refinancing or redevelopment would indicate the need for a more aggressive approach. The “dig and dump” method is fastest and provides the assurance that all contaminant has been removed. Mr. da Silva testified it is not the only realistic approach. Given that the contamination poses no risk to human health or the environment that requires immediate clean up, an owner who had no present plans to sell, redevelop or re-finance could take a longer term approach to the remediation, such as natural attenuation with monitoring.
[140] Mr. da Silva’s cost estimates for remediation were subject to a number of unknowns, including the exact size of the plume of contamination and the location of contaminated soil. He acknowledged five in-situ injections was a guess; it could be less. He agreed it would be reasonable to begin with one injection, monitor results and proceed again, if necessary. Part of the uncertainty is related to the fact that the potassium permanganate has to get through clay soil.
[141] The defendants jointly retained Pierre Maheux of Stantec to provide a peer review of the Paterson reports. He is geoscientist and was qualified as an expert in assessment of subsurface contaminants in soil and groundwater including the design and execution of remediation action plans.
[142] Mr. Maheux testified additional data is required before one could select any of the remedial options described in the Paterson reports dated January 25, 2010, January 27, 2010 and May 2, 2011. In his opinion, selecting a remediation approach requires first determining the extent of the impact in all directions, including vertically. Without an accurate site model, one cannot assess remediation options or select and successfully implement a remediation/risk management plan. Mr. Maheux noted that the existing data of groundwater samples showed concentrations of PCE to be relatively consistent at two wells, to have decreased, and then subsequently to have increased at another, while another well showed an increase with no intervening decrease. One of his recommendations was that a groundwater monitoring program should be established to audit the groundwater conditions to better inform the evaluation and selection of a remediation method, should one be found to be necessary. Another recommendation was that the impact of the contaminant must be delineated horizontally and vertically, including to neighbouring properties if need be, to better determine the contaminant load to be remediated and the potential risk to off site receptors/properties.
[143] In terms of the in-situ injections, his opinion was there was insufficient information to properly determine the number and placement of injection sites, and the type and volume of chemical required. Knowledge of the physical chemical conditions under the probable site of contamination is necessary before deciding which chemical to inject. In his view, the approach could be successful provided the hydrogeological conditions at the site are well understood and the impacted groundwater plume well-delineated. For example, he testified that it is necessary to know where the highest concentration of PCE is in order to proceed successfully.
[144] Mr. Maheux was of the view that the pump and treat system had fallen into disfavour as being too slow and costly for remediation but was still recognized as a good way to protect against migration off the contaminated site.
[145] With respect to the “dig and dump” approach, Mr. Maheux points out that the Paterson costs estimate appeared arbitrary. No data supported the amount of soil suggested to be required to be removed. He also stated the estimated volume of impacted groundwater anticipated to infiltrate the excavation was an arbitrary estimate. Mr. Maheux also wrote:
Given that groundwater is the medium of principal concern at the Site, ..., remediation targeting primarily soil impacts is an unusual approach. The remediation contractor costs (total of $1,242,500) highlight the weighting of effort on soil impacts. The sole line item addressing groundwater has a value of $25,000. ...
[146] Moreover, Mr. Maheux testified he would never embark on such a costly dig and dump without knowing the target and the full delineation.
[147] The conclusion Mr. Maheux reached was that a sufficient rationale had not been provided for the selection of active remediation let alone the most intrusive and expensive method. More data was necessary to show that active remediation is necessary and the particular approach to it best suited to this site. In his opinion, no more than ballpark price cost could be provided based on the data in hand.
[148] In cross examination, Mr. Maheux confirmed that the cost to clean up the adjacent property in the litigation had been estimated at $124,707 and the impact on Baxter Road exceeded the impact on that property. However, it was his opinion that the proposed extent of efforts to remediate that property had been greater than required and, therefore, the proposed costs also somewhat greater than actually required.
[149] I reject the generic “dig and dump” method as reasonable remediation on the facts in this case. Mr. Yang has testified that he has no intention of redeveloping the land. He is not proposing to sell and he did not testify to requiring financing from an institution that would require a clean environmental report. There is no pressing time requirement by reason of human health or environmental damage. Based on the testimony of his own expert, the factors that would be indicative of using this approach are not present here.
[150] I accept Mr. Maheux’s testimony rejecting the pump and treat method as unsuitable for this site. I note that Mr. da Silva has also moved away from it for other reasons. Both experts observed that while natural attenuation appeared to be ongoing at a certain time, this had been followed by an increase in PCE in some of the groundwater samplings. My conclusion is that a remediation process other than natural attenuation would be reasonable in these circumstances. The in-situ injection approach is the remaining option.
[151] The estimate provided by Paterson for this remediation was $60,000 to $70,000 in January 2010 based one injection into up to 10 injection wells. In December 2012, Paterson estimated this approach to cost $300,000 based on five injection events into 17 injection wells. Mr. da Silva’s testimony was that more than one injection is probably going to be necessary, but five may not be necessary. I am not persuaded that all of the additional injection wells are warranted by reason of the fluctuation upwards of the PCE found in some of the groundwater samplings. I agree with Mr. Maheux that more work needs to be done before the Paterson estimates could be regarded as firm, final and authoritative.
[152] Doing the best I can on the evidence available, I find the probable cost of reasonable in-situ injection remediation on the Baxter Road site to be $240,000. This is the per event cost in the most up to date Paterson estimate; i.e. $60,000 per event, for four events.
Damages
[153] As damages, the plaintiff seeks more than the costs of remediation. The plaintiff relied on Tabata v. McWilliams, 1981 1733 (ON SC), [1981] 33 O.R. (2d) 32 (Ont. H.Ct.J.) where the Court stated: “The assessment should be the purchase price less the market value of the property in light of its actual condition.”, and to Sevidal v. Chopra, 1987 4262 (ON SC), 1987 CarswellOnt 226 (Ont. H.Ct.J.) at para. 143:
In tort, prima facie, the measure of damages is the difference between the actual value and the price paid. The actual value is the value of the property sold with disclosure of the radioactive contamination.
[154] The best evidence I have upon which to assess damages in this way is to find Baxter Plaza was worth $1,450,000 at the time of purchase, less the cost estimate provided by Paterson at that time of up to $150,000, for a value of $1,300,000. Mr. Yang paid $1,350,00 for the plaza and accordingly, his damages would have been $50,000.
[155] The plaintiff also referred to Panapers Inc. v. 1260539 Ontario Ltd., 2007 ONCA 3. There, the appellants were found to have made fraudulent misrepresentations that induced the respondents to purchase a restaurant for $235,000. The trial judge ordered recession of the contract and awarded general damages for out of pocket loss including consequential damages. The Court of Appeal agreed that rescission and return of the purchase price were appropriate remedies but reduced the general damages where they found no evidence to support the claimed additional expenditures. The plaintiff relies on this case in seeking recession and return of the purchase price, and also an award for the difference between the purchase price and the current value of the property in a remediated state. Panapers is not authority for such an award which, in my view, is inconsistent with the essential concept of rescission. Further, the submission is contrary to the plaintiff’s pleading in which he seeks “rescission of the sale of lands and premises…Or in the alternative damages for remediation and loss of value.”
[156] Tridan Developments Limited v. Shell Canada products Limited, 2002 20789 (ON CA), 57 O.R. (3d) 503 (C.A.), addressed the measure of damages arising from the contamination of the respondents’ property by a gasoline spill from the appellant’s neighbouring gas station. The trial judge found that the plaintiffs were entitled to have their property remediated to pristine condition. The Court of Appeal for Ontario upheld this decision and stated at para 17:
In sum, the evidence compels me to conclude that there is no stigma loss at the pristine cleanup level. This conclusion also makes sense of the trial judge’s holding that cleanup to the pristine standard was justified in this case. If the trial judge’s assessment of stigma damage at $350,000 is taken as the diminution in value at cleanup to the guideline standard, then the more economical route is to proceed to the pristine level at an additional cleanup cost of $250,000 with no stigma damage.
[157] The plaintiff relies on these cases to seek damages based on the “dig and dump” generic method to restore his property to pristine condition, as opposed to a level of remediation to bring the property within MOE standards. Tridan was a case in nuisance where contaminant leaked from an adjacent property. The specific issue at trial was whether damages should be based on the cost of restoration or on diminution in value of the property. The trial judge held that the plaintiff was entitled to have its property placed back in the same state that existed prior to the spill and awarded damages based on the cost of generic excavation and disposal. He also awarded damages for the diminution in value by reason of stigma even after clean up. The Court of Appeal overturned this aspect of the award.
[158] Notably in Tridan, the Court ruled between the cost of clean up to meet MOE standards and the cost to restore to pristine condition. Those options are distinguishable from the tenor of the evidence in the present case, that any of the methods could remove the contaminant with a primary consideration being the length of time required to do so.
[159] The plaintiff also referred to London (City) Board of Education v. East Middlesex (District) High School Board, 1966 15 (SCC), [1967] S.C.R. 49 as authority for the proposition that the Court could award an amount of damages now without prejudice to the plaintiff’s right to obtain further damages if the remediation steps undertaken with the initial damage award did not prove successful. In fact, when the case reached the Supreme Court of Canada, both parties requested that the damages should be assessed once for and all and the Court expressed no opinion on the proposition advanced to me by counsel for Mr. Yang.
[160] Nor will I address counsel’s submission that the sale of Sonny’s Bar and Grill should also be set aside. Neither Sonny Sumra nor the numbered company, which sold Sonny’s to Mr. Yang, were parties to the action.
[161] Had I found for the plaintiff on issue of liability, I would have assessed his damages at $240,000 being the probable cost of remediation based on in-situ injections.
Costs
[162] Should the parties wish to make submissions on the issue of costs, they should arrange to do so through the trial office.
J. Mackinnon J
Released: May 24, 2013
CITATION: 6038212 Canada Inc. v. 1230367 Ontario Ltd., 2013 ONSC 3022
COURT FILE NO.: CV 09-45535
DATE: 20130524
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
6038212 CANADA INC. and John Yang
Plaintiffs
– and –
1230367 Ontario Ltd. and Surinder Sumra
Defendants
– and –
Zheng Anderson
Third Party
REASONS FOR JUDGMENT
J. Mackinnon J
Released: May 24, 2013
[^1]: PCE is an acronym for tetrachloroethylene which is a soil contaminant. It is mobile in groundwater and dense so that it sinks down through soil to below the water table. The Ministry of Environment (“MOE”) has established limits above which its presence in soil or groundwater is considered hazardous.