COURT FILE NO.: CV-13-483108
MOTION HEARD: 20210607
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Aragon Investments Ltd. and Aragon (St. Helens) Development (Ontario) Corporation, Plaintiffs
AND:
Moloney Electric Inc., Hammond Manufacturing Company Limited, Universal Power Transformer PVT Limited, Toronto Hydro-Electric System Limited and Toronto Hydro Corporation, Defendants
BEFORE: Master Jolley
COUNSEL: Lana Finney and Diana Weir, Counsel for the Moving Party Plaintiffs
Jennifer King, Counsel for the Responding Party Defendants Toronto Hydro-Electric System Limited and Toronto Hydro Corporation
Caitlin Sainsbury and Barbora Grochalova, Counsel for the Responding Party Defendant Hammond Manufacturing Company Limited
Jacquelyn Stevens and Alessia Petricone-Westwood, Counsel for the Responding Non-Party 213 Sterling Inc.
HEARD: 7 June 2021
REASONS FOR DECISION
[1] The plaintiffs bring this motion for an order to permit them to obtain soil and groundwater samples from 213 Sterling Road, Toronto (the “Sterling Property”) pursuant to a plan dated 26 October 2020 entitled the BluMetric Work Plan (the “Work Plan”) and attached as Schedule “A” to the fresh as amended notice of motion. The plaintiffs argue that they require samples from the Sterling Property to permit their expert, Dr. Douglas, to perform the forensic environmental testing necessary to respond to the expert’s reports served by Hammond.
[2] The Sterling Property is owned by 213 Sterling Inc. (“213 Sterling”), which is not a party to this action,. 213 Sterling bought the Sterling Property from the defendant Hammond Manufacturing Company Limited or its corporate predecessor (“Hammond”) in July 2010.
[3] The plaintiffs must seek leave to bring this motion as they set the action down for trial on 12 December 2019. The trial is set for September 2022.
[4] The plaintiffs also seek an order dismissing the action as against Toronto Hydro Corporation, Toronto Hydro-Electric System Limited and Moloney Electric Inc. on the consent of all defendants, other than Moloney, which is insolvent.
Background
[5] The plaintiffs bought 138 St. Helen’s Avenue, Toronto (the “Aragon Property”) in 2011. After purchasing it, they undertook extensive remediation of the contaminants in the subsurface. They have sued the defendants for remediation costs of roughly $3.4 million. The plaintiffs allege that there was ongoing migration of contaminants from the defendants’ property to the Aragon Property. The Toronto Hydro defendants owned and operated a hydro-electric substation at 211 Sterling Road at the material time and Hammond owned the Sterling Property.
Should leave be granted to bring this motion?
[6] The plaintiffs acknowledge that they require leave of the court under Rule 48.04(1) to bring this motion for an inspection. 213 Sterling and Hammond (the “responding parties”) argue that, as a central part of the test for leave, the plaintiffs must demonstrate that there has been a substantial or unexpected change in circumstances, which are not present here. They further argue that the inspection will not yield useful information and is not necessary for the proper determination of an issue in this action.
[7] All parties rely on the decision of Perell, J. Fulop v Corrigan 2020 ONSC 1648 on the test for leave. In upholding the decision of Master McGraw to grant leave to bring a motion for security for costs, Perell, J. noted that the approach to granting leave should be flexible, He held that there was no single test for leave to bring a motion and that the weight to be given to the various discretionary factors will depend on the circumstances of each case. In considering whether to grant leave, the court may consider a number of factors including (1) what the party seeking leave knew at the time it passed the trial record; (2) whether there has been a substantial or unexpected change in the circumstances since the action was set down for trial; (3) the purpose of the request for leave; (4) the nature of the relief being requested; (5) whether the party opposing the relief would suffer any prejudice; and (6) whether the relief sought would likely be granted if leave were given to bring the motion notwithstanding the filing of the trial record.
[8] The plaintiffs advised that purpose of the request for leave was to be able to respond to the two expert reports prepared by Dr. Michael Bock on behalf of Hammond in March and June 2019 (the “Bock Reports”) in which he opined that the PCB contamination on the Aragon Property did not originate from the same source as the PCB contamination on the Sterling Property.
[9] The plaintiffs admit that they did not obtain an expert to respond to the Bock Reports when they received them. They offer two explanations for not delivering a responding report before setting the action down for trial. First, they argue that they were hopeful that the action would settle at the upcoming mediation without the need for a further report. Second, they were permitted under the Rules to deliver a responding report after the set down date without obtaining leave. What they did not contemplate and what gives rise to the need for leave was that the expert would require further data to prepare his responding report.
[10] When they set the action down for trial, the plaintiffs had voluminous technical information concerning the presence of PCBs at the Sterling Property and had no indication they would not be sufficient for an expert to deliver a report responding to the Bock Reports. That did not come to light until they retained Dr. Douglas in September 2020 and he advised that he required additional soil and groundwater samples to carry out testing.
[11] The new development was not the need for a responding report as that could be served without leave after setting the action down; it was the expert’s need for additional sampling that was new. The plaintiffs argue that this previously unknown requirement is sufficient to constitute an unexpected change in circumstances since the set down date. They further they dispute the responding parties’ contention that the existence of a substantial and unexpected change is the central factor, and instead argue that it is only one matter for the court to consider. As evidenced in the Brick Warehouse Corp. v. B Gottardo Construction Ltd. 2011 ONSC 5933 (the “Brick”), leave was granted to bring a motion for an investigation and the investigation itself was ordered where the inspection sought to clarify the factual underpinnings of a tendered expert report, even though there was no substantial or unexpected change of circumstance.
[12] Hammond argues that this is not a situation where the relevant data is unavailable and leave should not be granted. But this is precisely what Dr. Douglas is saying – the chromatograms for the Sterling Property no longer exist and he cannot adequately respond to Dr. Bock’s report without that. A chromatogram is a visual depiction of the individual components of an organic compound. According to the plaintiffs, to identify the contaminants in a sample, a laboratory analyst conducts a visual comparison of the peaks on a chromatogram generated from an actual sample to the peaks on a chromatogram generated from a laboratory reference standard.
[13] In the course of the retainer, Dr. Douglas sought the chromatograms for the PCB data collected for each of the three properties in issue, namely the Aragon Property, the Sterling Property and the property at 211 Sterling owned by the Hydro Ontario defendants. The plaintiffs then learned that chromatograms were no longer available for the Sterling Property or for 211 Sterling. As a result, Dr. Douglas advised that he required new soil and ground water samples from those properties (now limited to the Sterling Property) to conduct his own forensic analysis to identify the contaminants at the Sterling Property and the Aragon Property and to respond to the Bock Reports. He proposes to subject these samples to a forensic analytical method known as EPA Method 1668 to determine whether there were similarities between the contaminants at the two sites.
[14] As to the timing of this motion for leave, I accept that this issue did not become apparent until the retainer of Dr. Douglas. The plaintiffs first contacted Dr. Douglas for preliminary information in January 2020, after the failed October 2019 mediation and after they set the action down for trial. They did not make contact again until August 2020 and then retained Dr. Douglas at the end of September 2020. I do not accept that the pandemic caused any of the delay from October 2019 to September 2020 in retaining Dr. Douglas. There was little interruption in the court schedules and there was no need for the courts to be physically open in order for the plaintiffs to speak to Dr. Douglas. He could have been, and probably ultimately was, instructed by phone or video conference.
[15] I find that there will be no prejudice to the parties or the trial schedule should the plaintiffs be granted leave to argue the motion. The action is set for a four week trial commencing 26 September 2022. In the course of scheduling this motion, the parties have agreed to a court-ordered schedule that will accommodate this investigation if the motion is granted. Should the plaintiffs succeed on this motion, the parties have agreed that the plaintiffs’ expert report will be due 29 October 2021 and the reply expert report from Hammond due 3 May 2022. Any supplementary experts’ reports will be due 30 May 2022.
[16] The separate issue of any prejudice to the defendant and 213 Sterling will be dealt with below. Similarly, I will deal below with the question of whether the relief would likely be granted notwithstanding the filing of the trial record.
[17] Considering the factors enumerated in Fulop, supra and noting the approach is to be a flexible one, for the reasons set out above, I exercise my discretion to grant the plaintiffs leave to bring this motion for an inspection.
Should an inspection order be granted?
[18] The court may order an inspection of real property where it appears to be necessary for the proper determination of an issue in a proceeding (Rule 32.01(1)). Where an inspection is granted, the court may authorize entry on or into any property and permit the measuring, surveying or photographing of the property in question, or of any particular object or operation on the property, and permit the taking of samples, the making of observations or the conducting of tests or experiments (Rule 32.01(2)).
[19] The court in Ontario District School Board 19 v 553518 Ontario Ltd. (2000) 49 C.P.C. (4th) 384 (Ont. S.C.J.) held “necessary” to mean “useful” or “probative of an issue”. In short, the party must demonstrate that there is “a reasonable possibility the proposed test will reveal something useful for the trier of fact (that is, something which will assist the trier of fact in determining an issue in the proceeding)” (per paragraph 16(b)).
[20] If it is determined the inspection would aid in determining an issue on the merits, it should only be refused if “there is evidence of some countervailing prejudice or if the order would amount to an abuse of process” (Morier v. Michelin North America (Canada) Inc. [2010] O.J. No. 6131 (SCJ) at paragraph 21).
[21] The plaintiffs argue that the proposed inspection is critical to the key issue in dispute in this action, namely the source of the contamination on the Aragon Property. They argue that they will be significantly prejudiced if they are required to go to trial without being able to deliver a proper responding report from its own forensic expert. Without the inspection, Dr. Douglas’ report will be limited to a critique of the Bock Reports.
[22] Eleven expert reports were filed on this motion. I will not attempt to summarize them here, other than as is needed for the determination of this motion.
[23] PCBs are marketed under the trade name Aroclor with a # following. The higher the #, the higher the chlorine content by mass. Aroclor 1242 was used in the manufacture of electrical transformers which was carried out at the Sterling Property from 1922 to 2001. The plaintiffs say that capacitors, which were used to store electricity and which also use Aroclor 1242, were also manufactured at the Sterling Property, an allegation 213 Sterling denies.
[24] Dr. Bock used Method 8082 as his testing methodology, which the defendants argue is the standardized testing method in Canada for the assessment of PCBs in the environment. He determined that the PCBs at the Aragon Property are the lighter Aroclors, namely 1242 and 1248, while the PCBs at the Sterling Property are the heavier Aroclors 1254 and 1260. Based on his assessment, he concluded that the PCBs on the Aragon Property did not come from the Sterling Property.
[25] The plaintiffs contend that Aroclor 1242 was found at both the Sterling Property and the Aragon Property. They argue that Dr. Bock came to his conclusion that the Aroclors at the Sterling Property were restricted to Aroclor 1254 and Aroclor 1260 without knowing about a 1985 report that identified Aroclor 1242 and Aroclor 1248 in numerous samples on the Sterling Property.
[26] The plaintiffs argue that, while Method 8082 is appropriate in some circumstances, the testing in this instance must be done using Method 1668. Dr. Douglas argues that Method 8082, which is admittedly recommended for regulatory investigations, requires a laboratory technician to rely upon a visual assessment to identify PCB Aroclors, adding subjectivity to the analysis. This makes it inappropriate when the purpose of the testing is to go beyond determining whether a contaminant is present at a site and in what concentration to determining whether contaminant samples come from the same source. He notes that Method 8082 could be used if the underlying chromatograms were available, but without them, he cannot test for any identification errors or respond to Dr. Bock’s conclusion that there is no Aroclor 1242 on the Sterling Property.
[27] All parties agree that Method 1668 is a newer method that allows for the detection of lower concentrations. The responding parties concede that chromatograms are not available for the Sterling Property samples, but argue they are not necessary and all parties can rely on the analytical data that does exist. They argue that it is evident that the Sterling Property contains only Aroclors 1254 and 1260 and the Aragon Property contains Aroclors 1242 and 1248. No amount of additional testing will change that outcome. The present data is sufficient to establish the lack of connection between the PCBs on the two sites.
[28] They also argue that Dr. Douglas’ position presumes that subjective errors were made in analyzing the data and there is no evidence to support such a presumption. They contend that this risk of subjectivity is highly overblown. They point to multiple laboratories showing consistent findings of only Aroclor 1254 and Aroclor 1260 at the Sterling Property. Further, the note that all laboratories accredited to run Method 8082 testing are frequently audited to ensure they follow the appropriate quality assurance/quality control processes.
[29] Method 1668 for which Dr. Douglas advocates is based on a molecular mass analysis. It takes longer to perform than Method 8082, requires an experienced technician and is more expensive. The plaintiffs argue that this advanced methodology is called for in this case as it will allow the experts to accurately identify the presence of different Aroclors.
[30] Dr. Sandau for 213 Sterling argues that, while Method 1668 may be preferable, it will not provide any substantial new information to associate the contamination of the Aragon Property with the Sterling Property.
[31] There was much argument about the effect of weathering and whether weathered mixture of Aroclors can result is misidentification when Method 8082 is used. The plaintiffs argue that certain Aroclors weather at a faster rate, which makes it more difficult for a lab to accurately identify the Aroclor number. They do not argue that weathering changes one type of Aroclor into another but that lighter Aroclors might be missed in the analysis. The responding parties argue that the Bock Reports already adequately address the effects of weathering.
[32] The impact of weathering on the conclusions reached cannot be resolved on this motion. What I can conclude is that allowing testing using Method 1668 should remove the argument about the impact of weathering on the reliability of the Bock Reports from the many issues that the trial judge must address.
[33] The responding parties argue that the Bock Reports finding that there were no Aroclors 1242 or 1248 at the Sterling Property is conclusive on this issue. This is the issue to which the inspection will speak, as Dr. Douglas believes that the use of Method 1668 testing on samples will demonstrate that Aroclor 1242 is present at the Sterling Property (consistent with the 1985 reports). Based on the evidence before me, chromatograms are necessary for the plaintiffs to respond to Dr. Bock’s Reports. This is particularly so where Dr. Douglas has opined that he cannot do the testing needed to respond to the Bock Reports without chromatograms. Even if I were to find Method 8082 an acceptable method in this circumstance, the fact is chromatograms from those tested samples are no longer available.
[34] The responding parties have asked me to conclude, based on the present evidence, that there are “obvious differences” between the PCBs on the Sterling Property and the PCBs on the Aragon Property. This is a conclusion for the trial judge to draw. The responding parties may ultimately be correct, but having the additional information from this testing will aid in that analysis.
[35] In Brick, supra, Lauwers, J. granted the defendants’ motion for an inspection despite significant delay in bringing the motion, as the “request relates to a real issue of fact that is relevant to the proceedings”, in particular “what happened in this case and what the cause of the loss was.”
[36] I come to the same conclusion in this instance. As discussed further in paragraphs 49 and following, infra, the testing does not need to answer all of the questions for trial, but it is intended to speak to whether the contaminants at the Aragon Property and at the Sterling Property are from the same source. That is a real issue of fact relevant to the proceeding and the inspection will assist the trial judge in determining what happened and the cause of the loss.
Prejudice
[37] Having determined that the inspection would be of assistance in determining an issue on its merits, I must turn to whether there is evidence of some countervailing prejudice.
[38] 213 Sterling argues that the testing of its site will be disruptive and invasive. The testing may no doubt be invasive as BluMetric will need drill new boreholes and new monitoring wells if there are none existing from which samples can be obtained. However, the Sterling Property is a vacant commercial site and the testing is proposed to be carried out along the perimeter on what appears to be an empty parking lot.
[39] 213 Sterling further argues that it will be prejudiced if the inspection proceeds as information about the Sterling Property will be put into the public domain through the court process and could expose it to both civil and regulatory liability. As a non-party, it would not have standing at trial to argue that reports concerning the state of the Sterling Property should be kept confidential.
[40] I find any prejudice to the responding parties does not outweigh the benefit the inspection will bring to the issues at trial. I say this for three reasons. First, 213 Sterling has already filed experts reports on this motion that comment on the state of contamination at the Sterling Property without obtaining a sealing order, making that information publicly available now. In addition, the Ministry of the Environment has had evidence about the state of the Sterling Property for years, albeit nothing new since 2013.
[41] Second, the plaintiffs have offered to request a sealing order over these documents at trial. It will then be for the trial judge to determine if these documents should be kept from the public.
[42] Lastly, the plaintiffs have offered a limited indemnity and release contained in an access and release agreement sent to 213 Sterling on 22 October 2020 and marked Exhibit “LL” to the Page affidavit sworn 29 January 2021. The plaintiffs advised in the course of argument that they remained prepared to abide by the terms of the proposed access and release agreement, subject to an update on the timing in paragraph 5. While 213 Sterling complains that the release and indemnity does not cover all exposures that it could face as a result of the disclosure of reports on testing related to the Sterling Property, I find its scope to be appropriate.
[43] In the proposed access and release agreement, the plaintiffs agree to “indemnify, defend, and hold harmless [213 Sterling] from and against any and all liability, loss or damage arising directly out of the Work [as defined] carried out at the [Sterling] Property by Aragon, through its agent, BluMetric”.
[44] Further, the plaintiffs propose to release 213 Sterling from any claims that they might have concerning contamination on the Aragon Property. However, if a third party commences an action or a regulatory proceeding against the plaintiffs as a result of any environmental contamination, the plaintiffs retain their right to allege that the Sterling Property was the source of the contamination and claim for contribution and indemnity from 213 Sterling. 213 Sterling seeks to remove this possibility through this form of release. I find it would be disproportionate to require the plaintiffs to give up a claim for indemnity they would otherwise be able to pursue in order to obtain a limited number of samples from the Sterling Property.
The Proposed Testing
[45] Dr. Douglas advised the plaintiffs that the testing or sampling issue can be addressed by obtaining soil and groundwater samples from the Aragon Property and from the Sterling Property and analyzing them using Method 1668. The Work Plan, as noted, is set out as Schedule “A” to the fresh as amended notice of motion.
[46] There was no argument before me on the specifics of the Work Plan, other than the responding parties’ position that it had not been adopted by Dr. Douglas. The plaintiffs confirmed that they are not seeking any amendments to the Work Plan filed. They propose that the responding parties’ environmental consultants be permitted to participate in the testing at both sites.
[47] There is no evidence that the testing will impair the integrity of the Sterling Property; the plaintiffs agree to return it to its pre-inspection condition, to provide the indemnity discussed above and to compensate 213 Sterling for its reasonable costs incurred in having its environmental consultant attend at the inspection.
Aragon Property Samples
[48] The responding parties argue that there is no evidence before me that samples from the Aragon Property will be available, given the extensive remediation that took place somewhere between 2013 and 2017. The plaintiffs’ vice president deposed in a reply affidavit sworn 14 April 2021 that when the plaintiffs remediated the Aragon Property, they left untouched a portion in the northeast corner referred to in the motion materials as the notch. There is no current evidence about the environmental state of the notch, the last data being from 2011. While the plaintiffs could have carried out current testing of their own property to ensure that the notch does have viable samples against which to compare, the evidence before me is that the notch was not remediated, was found to have contamination in its soil and groundwater in 2011 and there is reason to believe, based on the evidence of Dr. Douglas, that it will yield appropriate samples. This facts are distinguishable from those before Master Short in Tre Memovia Developments Ltd. v. 1491319 Ontario Inc., 2019 ONSC 4, affirmed, 2020 ONSC 1568 where testing of the defendant’s property was denied. In that case, there was evidence that the plaintiff’s property had been entirely remediated and redeveloped such that the proposed testing of the two properties would not be probative.
[49] If it turns out that no samples of contamination are obtained from the notch on the Aragon Property, this will no doubt be raised as part of any costs submissions at trial regardless of the outcome of the trial.
Migration of Contaminants from the Sterling Property
[50] The respondents also argue that the testing will not assist the court as the plaintiffs have no credible evidence that the contaminants could have migrated from the Sterling Property to the Aragon Property. Without that evidence, they argue that the investigation of the Sterling Property will not provide probative evidence of the source of the contamination on the Aragon Property.
[51] The migration issue is a separate issue that the plaintiffs will have to meet at trial but it should not preclude the inspection. At trial, the plaintiffs must demonstrate that the contaminants on the Aragon Property originated from the Sterling Property. To do so, they must address two components: (a) whether the contaminants on the Aragon Property are the same or similar to those on the Sterling Property; and (b) how the contaminants travelled from the Sterling Property to the Aragon Property. It is conceded by the plaintiffs that this testing does not relate to issue (b) and will not shed light on the migration issue. The testing proposes to address issue (a) only. Without establishing that the contaminants on the two properties are the same or sufficiently similar, the plaintiffs will never get to the migration issue.
[52] In order for an inspection to be ordered, it does not have to relate to all issues in the litigation, but only to an issue that the trial judge will need to determine. I am satisfied that the inspection will assist the court in addressing the issue of whether the contaminants on the Aragon Property and the Sterling Property are the same or similar.
[53] Similarly, while the defendants may argue at trial that the lack of testing of other sites in the vicinity means less weight should be put on the Sterling Property testing, it is not a reason to deny the inspection per se.
Conclusion
[54] Aragon shall be granted entry to the Sterling Property within 30 days of this order for the purpose of inspecting the Sterling Property and taking samples, as outlined in the Work Plan.
[55] The plaintiffs shall prepare an order that shall attach the Work Plan and the access and release agreement (Exhibit LL to the Page affidavit sworn 29 January 2021, with paragraph 5 updated as to timing) and submit it to me with the consent of the responding parties as to form and content. If there is disagreement over the form of the order, 213 Sterling and Hammond may submit to me their proposed version of the order and a short commentary on the schedules within five days of receipt of the plaintiffs’ draft. I will then sign the appropriate version.
[56] The order dismissing the action as against the Toronto Hydro defendants was signed and sent to all parties at the conclusion of the argument of the motion.
[57] The parties uploaded their costs outlines at the conclusion of the motion. If they are unable to agree on costs within 30 days of the release of this decision, they may each file costs submissions not more than three pages in length by emailing a copy to my assistant trial co-ordinator at Christine.Meditskos@ontario.ca.
Master Jolley
Date: 30 June 2021