COURT FILE NO.: 12-53595

DATE: 2021/07/29

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Sorbam Investments Ltd.

Plaintiff

– and –

Alan David Litwack, Gary Michael Litwack and Deborah Ruth Litwack, in their capacity as Estate Trustees of the Estate of Moses Litwack, deceased, Samuel Litwack and 1129892 Ontario Limited

Defendants

Counsel:

Michael S. Hebert and Cheryl Gerhardt McLuckie, for the Plaintiff

Steven Greenberg, for the Defendant 1129892 Ontario Limited

HEARD: November 30, December 1, 2, 3, 4, 7, 8, and 11, 2020

REASONS FOR JUDGMENT

RYAN BELL J.

Overview

[1] In this environmental contamination claim, the primary issue is whether a property owner who was not the “spiller” of chemicals can be liable for the migration of contaminants onto a neighbouring property because the property owner had knowledge of and allowed the migration of contaminants to continue. The source of and the direction in which the contaminants migrated, and the extent of the property owner’s knowledge are live issues in this case.

[2] The plaintiff, Sorbam Investments Ltd., is the former owner of 1770 Woodward Drive, Ottawa. Sorbam contends that 1770 Woodward was contaminated by the migration of chemicals from a dry-cleaning business. That business historically had operated on the property directly to the north, at 1760-1764 Woodward Drive (“1760 Woodward” and, together with 1770 Woodward, the “Properties”).

[3] The defendant, 1129892 Ontario Limited (“112Co”), is the current owner of 1760 Woodward and is the only remaining defendant in the litigation. The dry-cleaning business that operated on 1760 Woodward was a former tenant of the other named defendants, the Litwacks. 112Co purchased 1760 Woodward from the Litwacks in 2007. Sorbam’s claim against the Litwacks was dismissed following a motion for summary judgment.[^1]

[4] Sorbam alleges that, despite 112Co being put on notice in 2010 about the alleged migration of contaminants, 112Co took no meaningful steps to address the situation. Sorbam frames its action against 112Co in nuisance, negligence, and under s. 99 of the Environmental Protection Act, R.S.O., c. E.19 (the “EPA”). Sorbam seeks damages for diminution in value of 1770 Woodward and for engineering and consulting expenses.

[5] 112Co denies liability. It contends that the source of the contamination was located on 1770 Woodward and says that contamination was present on 1770 Woodward before 112Co purchased 1760 Woodward. 112Co also says there is no evidence of further contamination occurring after 2010. 112Co challenges Sorbam’s diminution of value evidence and argues that Sorbam failed to mitigate the alleged damages.

[6] For the following reasons, I find 112Co liable to Sorbam in nuisance and in negligence. Sorbam is entitled to damages in the amount of $1,291,307.21 for diminution in the value of 1770 Woodward and for engineering and consulting expenses.

Factual Background

1770 Woodward and 1760 Woodward

[7] 1770 Woodward is located in the Carlington Business Park on the east side of Woodward Drive, at its intersection with Courtwood Crescent, in Ottawa’s west end. A two-storey office building is located on site. The Carlington Business Park is a small commercial area of mostly office uses.

[8] Sorbam purchased 1770 Woodward in April 1987 for $2,250,000. In May 2008, Sorbam listed the property for sale at a price of $3,200,000. When the property was first listed for sale, the building was substantially fully leased; by the time 1770 Woodward was sold in April 2017 at a price of $1,600,000, only one tenant remained. It is not in dispute that the reason for the increase in the vacancy rate over time was unrelated to any environmental issues associated with the property.

[9] 1760 Woodward is situated immediately to the north of 1770 Woodward, also on the east side of Woodward Drive. 1760 Woodward is occupied by a 2-storey commercial building. The Litwacks owned 1760 Woodward until March 2007 when they sold the property to 112Co.

Contaminants of Concern

[10] The “contaminants of concern” in this case are primarily “volatile organic compounds” or “VOCs.” Tetrachloroethylene or “PCE” is the primary solvent used in the dry-cleaning industry. PCE is sometimes referred to as the “parent” product. It breaks down into “daughter” products: trichloroethylene (“TCE”) and (cis)1,2-dichloroethylene (“DCE”).

The 2006 Phase I and Phase II Environmental Site Assessments on 1760 Woodward

[11] As part of the sale of 1760 Woodward from the Litwacks to 112Co, which was completed in 2007, the Litwacks commissioned Paterson Group Inc. to conduct a Phase I Environmental Site Assessment (“ESA”) of the property. As detailed in its September 15, 2006 report, Paterson Group identified that “Spic and Span cleaner” [sic] as well as various other commercial businesses had historically used the property. Paterson Group recommended a Phase II ESA in order to determine if the soil and groundwater of 1760 Woodward had been impacted by previous on-site activities or by current or former activities on the neighbouring property to the west (not 1770 Woodward). Carlos Da Silva, an environmental engineer who was involved in Paterson Group’s Phase I and Phase II ESAs on 1760 Woodward, testified that there would be “concerns” any time dry-cleaning operations are identified in a Phase I ESA.

[12] Paterson Group completed its Phase II ESA in October 2006. Paterson Group created five boreholes on 1760 Woodward, below the existing ground surface. Soil samples were submitted for testing for a combination of petroleum hydrocarbons and VOCs. No detectable concentrations of these substances were identified in the soil samples tested.

[13] As part of its Phase II ESA, Paterson Group also installed a groundwater monitoring well at Borehole 4. Borehole 4 is located in the northeast corner of 1760 Woodward. A water sample from the groundwater monitoring well was submitted for testing for VOCs. The test results identified one substance in excess of the applicable Ministry of the Environment[^2] (“MOE”) standards: specifically, the PCE concentration of 9.5µg/L was in excess of the MOE 5.0 µg/L limit. Paterson Group did not, at this time, consider the full extent of the contaminated groundwater plume.

[14] According to Paterson Group, the presence of PCE and TCE in the groundwater indicated impact from solvents commonly used in auto body work and dry-cleaning operations. Based on the information available to it, Paterson Group was not able to determine whether the source of the contamination was 1760 Woodward or “adjacent properties”, being the neighbouring property to the west previously identified. Paterson Group’s opinion was that the level of impact to the groundwater identified at Borehole 4 did not warrant remediation of the property “at this time.”

[15] Terry Wall, the principle of 112Co, confirmed in his testimony that, prior to 112Co purchasing 1760 Woodward, he was provided with copies of Paterson Group’s Phase I and Phase II ESAs of 1760 Woodward. He testified that he was “instructed not to worry” about the contaminant exceedances reflected in the Phase II ESA report because they were “so small.”

[16] Paterson Group was asked to conduct a supplemental Phase II ESA on 1760 Woodward. The purpose of the supplemental investigation was to “further delineate groundwater contamination previously identified on site...in order to determine the possible source(s) of the contamination.” Three additional monitoring wells were installed on site. Groundwater samples were recovered from these monitoring wells and from the monitoring well previously installed. The groundwater levels were measured on two different dates in each of the monitoring locations.

[17] Based on the groundwater elevations, Paterson Group inferred that the groundwater flows from the southeast corner of 1760 Woodward to the northwest corner of the property.

[18] As part of the supplemental Phase II ESA of 1760 Woodward, the groundwater samples obtained from each of the four locations were tested for VOCs. Concentrations of PCE in excess of the applicable MOE standards were detected in Boreholes 4 and 5 (the former being in the northeast corner and the latter being in the southwest corner of the property). A concentration of PCE equal to the laboratory method detection limit was identified in Borehole 1. According to Paterson Group, the identification of DCE in Borehole 2 and TCE in Borehole 4 indicated that the contaminant release was the result of historical activities because “these compounds are typical degradation products of PCE.”

[19] Paterson Group’s opinion, as stated in its supplemental Phase II ESA, was that “based on the distribution of the VOC compounds identified and our observations regarding the current activities taking place on the site and adjacent properties...the PCE contaminants are a result of historical activities on, or, conducted in the immediate vicinity of the subject property.” Paterson Group did not recommend a remediation program be implemented but stated that “[c]onsideration may be given to conducting an annual groundwater sampling program, at least for several years, to confirm our current opinion...and assess the affects [sic] of natural attenuation.”

[20] Mr. Wall was also provided with a copy of Paterson Group’s December 1, 2006 Supplemental Phase II ESA report.

Paterson Group’s January 2007 Groundwater Resampling

[21] In January 2007, the Litwacks requested that Paterson Group resample the groundwater at 1760 Woodward. Paterson Group reported that PCE concentrations in the groundwater samples from Boreholes 4 and 5 remained above applicable MOE standards, although the test results reflected a decrease in concentrations from the previous test results associated with the supplemental Phase II ESA. Paterson Group observed that there had been a general decrease in groundwater VOC concentrations across the site since the original groundwater sampling.

[22] Mr. Wall received a copy of Paterson Group’s 2007 groundwater resampling report.

Assessments of 1770 Woodward

[23] In January 2010, approximately 18 months after Sorbam listed 1770 Woodward for sale, Sorbam received the first offer to purchase 1770 Woodward. Exhibit A to the offer required that Sorbam provide a recent Phase I and Phase II “Environmental Assessment Study.”

[24] Metcalfe Realty Company Limited, Sorbam’s property manager, commissioned SLR Consulting (Canada) Ltd. to conduct a Phase I ESA of 1770 Woodward. As set out in its March 2010 report, SLR Consulting identified three environmental concerns with the property:

• possible soil and groundwater contamination associated with a neighbouring automotive repair facility;
• possible soil and groundwater contamination associated with a former neighbouring dry- cleaning facility; and
• possible asbestos-containing materials within the building.

[25] Searches identified a former dry-cleaning facility on the neighbouring property to the immediate north, that is, 1760 Woodward. John McKenna, who commissioned the Phase I ESA on behalf of Metcalfe Realty, testified that these potential environmental concerns were previously unknown to Sorbam. SLR Consulting recommended that a Phase II ESA of 1770 Woodward be conducted.

[26] As set out in its April 2010 Phase II ESA report on 1770 Woodward, SLR Consulting “advanced” exterior boreholes to assess the soil and groundwater conditions at 1770 Woodward. All boreholes were completed as monitoring wells. The depth to groundwater was measured in all accessible monitoring wells. Based on the water levels measurements taken, SLR Consulting inferred the groundwater flows westward across 1770 Woodward.

[27] Groundwater samples from Monitoring Wells 2, 3, and 4 showed “low or non-detect” concentrations of petroleum hydrocarbons and VOCs, falling below applicable MOE standards. Groundwater samples from Monitoring Well 1 showed PCE, TCE, and DCE concentrations that exceeded applicable MOE standards. Monitoring Well 1 is situated in the northwest corner of 1770 Woodward. To the immediate north is 1760 Woodward.

[28] Based on the groundwater results, SLR Consulting recommended submission of the report to the MOE for review, implementation of a quarterly groundwater monitoring program, and the remediation of groundwater impacts through in situ chemical oxidation.

[29] In April 2010, following the delivery of its Phase II ESA report, SLR Consulting provided Sorbam with a “liability cost estimate” for the contaminated groundwater identified at 1770 Woodward. SLR Consulting continued to recommend that its Phase II ESA be provided to the MOE and that a groundwater program be implemented. SLR Consulting concluded, however, that active remediation in the form of in situ chemical oxidation might not be practical because:

...since the contaminated groundwater is from an off-site source it is very likely that recontamination of the groundwater will occur and the in situ oxidation may only be a temporary solution.

[30] Instead, SLR Consulting recommended a “contaminant management plan” that would include a three-year groundwater monitoring program and indoor air quality testing. If the results showed an increase in groundwater contamination concentration, migration of groundwater contamination across the site, or indoor air quality concerns, active remediation or a containment measure would be required, such as in situ oxidation or biodegradation or an in situ reactive barrier wall. SLR Consulting estimated the total cost of the plan to be $222,000.

[31] In September 2010, SLR Consulting reported on its further groundwater monitoring and sampling at 1770 Woodward. The objective of the sampling was to verify the groundwater flow direction and the concentrations of contaminants of concern previously identified.

[32] Based on the results of its fall 2010 assessment work, SLR Consulting inferred the groundwater flow direction to be west to southwest. The groundwater sample from Monitoring Well 1 showed a PCE concentration which exceeded applicable MOE standards. All remaining VOC parameters were at non-detect or low concentrations, below applicable MOE standards. SLR Consulting recommended further borehole drilling and monitoring well installations at 1770 Woodward and of the “neighbouring site to the immediate north”, that being 1760 Woodward.

[33] Sorbam provided the MOE with a copy of SLR Consulting’s Phase II ESA report on 1770 Woodward.

[34] Sorbam, through Metcalfe Realty, commissioned Pinchin Environmental Ltd. to conduct a peer review of SLR Consulting’s work on 1770 Woodward. Pinchin’s December 2010 report was entered as an exhibit at trial. The results of the analyses of the groundwater collected from Monitoring Wells 1, 1B, 5, and 6 identified concentrations of various substances, including PCE, TCE, and DCE, which exceeded applicable MOE standards. In Pinchin’s opinion, the impacts identified likely migrated from “the former adjacent dry cleaning facility to the north of the Site.”

Sorbam puts 112Co on Notice of the Alleged Migration of Contaminants

[35] On August 24, 2010, Sorbam’s counsel provided 112Co with a copy of SLR Consulting’s Phase II ESA report on 1770 Woodward, stating that “[i]t would seem that the source of such chemicals could be the former owner and tenant of your property, which was used as a Spic N Span drycleaner from approximately 1989 until 1998.” Sorbam advised that in order to properly delineate the extent of any contamination, a further assessment on 1760 Woodward would be required. Sorbam also requested any environmental reports that were done at the time of 112Co’s purchase of the property.

[36] 112Co’s response through its former counsel was blunt: Sorbam should “look elsewhere” for the source of the alleged contamination. 112Co did not agree to provide access to 1760 Woodward so that additional boreholes could be advanced to complete the investigation.

The MOE Becomes Involved

[37] In May 2011, the MOE contacted 112Co. The MOE requested that 112Co provide a work plan by June 28, 2011, under the guidance of a “qualified consultant” (as defined in the EPA), for the completion of a report detailing the groundwater and soil investigation findings for 1760 Woodward. The MOE asked for a list of all dry-cleaning businesses that had operated on site and any ESAs or remedial measures conducted.

[38] The MOE updated Sorbam in August 2011 and reported that the owner of 1760 Woodward had told them that a Phase II ESA had been conducted and that the report would be provided to the MOE in early September 2011.

[39] In November 2011, 112Co provided the following reports to MOE: Paterson Group’s October 2006 Phase II ESA, Paterson Group’s December 2006 Supplemental Phase II ESA, and Paterson Group’s September 2011 Supplemental Groundwater Sampling report.

[40] In the September 2011 report, Paterson Group noted a recent change in the TCE and DCE concentrations identified in Borehole 1. This borehole was located in the southwest corner of 1760 Woodward, immediately adjacent to 1770 Woodward. Based on their groundwater data, Paterson Group inferred the groundwater was flowing in a northwesterly direction, “placing 1770 Woodward Drive upgradient” of 1760 Woodward. Paterson Group concluded that 1770 Woodward was the likely source of the VOC contaminants.

[41] Further exchanges between the MOE and 112Co followed. In December 2013, 112Co was provided with the MOE’s technical memorandum. In that memo, the MOE expressed its opinion that the source of the PCE groundwater contamination on 1770 Woodward was originating from 1760 Woodward, and specifically, the dry-cleaning operation that had operated on site in the past. The MOE’s memorandum stated that additional monitoring wells were required to fully determine the extent of the VOC impacts.

[42] In September 2014, the MOE asked 112Co to retain a qualified consultant to address the MOE’s concerns. 112Co was asked to provide a written progress report by November 1, 2014. In response, in December, 112Co provided the MOE with a September 2014 technical report prepared by Paterson Group.

[43] On February 2, 2015, the MOE issued a Provincial Officer’s Order to 112Co that required the company, by March 2, 2015, to retain the services of a qualified person with experience and expertise in completing ESAs to (i) undertake a soil and groundwater monitoring program and assessment for the contaminants of concern at 1760 Woodward; and (ii) prepare a detailed Phase II ESA report for the property, including the findings of the assessment and the qualified person’s recommendations. The Provincial Officer’s Order required that 112Co submit the Phase II ESA report to the MOE by September 1, 2015.

[44] In July 2015, Paterson Group carried out an environmental delineation program for the chlorinated solvents at 1760 Woodward. This report was provided to and reviewed by the MOE. The purpose of Paterson Group’s assessment was to identify the potential VOC impacted groundwater plume in the area of both Properties. Seven boreholes were placed on 1760 Woodward. Boreholes 1-15, 2-15, and 3-15 were located along the southern border of the property. Groundwater monitoring wells were installed at Boreholes 1-15 through 7-15.

[45] Based on the groundwater levels obtained, Paterson Group inferred that the regional groundwater flows in a northwesterly direction.

[46] No detectable VOC concentrations were identified in five of the six soil samples analysed. The detected VOC concentrations in the soil sample analysed from Borehole 6-15 were below the MOE standards.

[47] Groundwater samples were collected from the monitoring wells. Paterson Group identified that the DCE concentrations in the groundwater samples analysed from Boreholes 1-15 and 6-15, and the TCE concentration from Borehole 6-15 were in excess of the MOE standards. The PCE concentrations identified in the groundwater samples from Boreholes 6-15 and 7-15 were also in excess of the MOE standards.

[48] Based on these results and the approximate northwesterly groundwater flow direction, Paterson Group “suspected” the origin of the identified VOC groundwater impact plume to be to the southeast of 1760 Woodward: “[t]he historical on-site activities at 1770 Woodward Drive are considered to be a potential source of the elevated parameter contaminant plume.”

[49] Shawn Trimper, a hydrogeologist with the MOE, reviewed Paterson Group’s July 2015 delineation report, together with other reports provided to the MOE. Mr. Trimper testified at trial. Mr. Trimper explained why, as set out in his December 2016 memorandum, he disagreed with Paterson Group’s conclusion that the identified chlorinated solvent impacts on 1760 Woodward originated from 1770 Woodward. Mr. Trimper concluded that the identified impacts were originating from 1760 Woodward, and were most likely related to the dry-cleaning operation that historically operated on site.

Offers to Purchase 1770 Woodward

[50] It is not necessary to review in detail the various offers made to purchase 1770 Woodward. It is readily apparent from the evidence that, over time, the price being offered for the property by potential purchasers declined and the environmental concerns associated with the property repeatedly proved to be a stumbling block.

[51] As previously noted, the property was first listed for sale by Sorbam in May 2008 at a price of $3,200,000. Mr. McKenna, of Metcalfe Realty, Sorbam’s property manager, testified that at the time the property was listed for sale, Sorbam had no knowledge of the environmental condition of the property.

[52] The ultimate purchaser of the property in 2017 made a first offer on the property in January 2010 at $2,500,000. The offer required that an environmental assessment be completed within five days of acceptance. The offer was amended on five occasions; ultimately, however, the proposed transaction was terminated by way of a mutual release. Mr. McKenna testified that during this first “go round”, there were concerns on the part of the purchaser about the costs and liability of dealing with the environmental contamination on the property.

[53] A church emerged as a potential purchaser in early 2011. Mr. Quinn is an experienced real estate broker who was involved in the efforts to sell 1770 Woodward beginning in 2011. He testified at trial. On cross-examination he stated that the environmental problems associated with the property had to be disclosed. The disclosure was explicitly referenced in a proposal put by Sorbam to the church in February 2011. In the church’s first counter-offer, the disclosure paragraph was amended to require that Sorbam would remediate the site at its expense prior to closing. A subsequent offer by the church was conditional on warranties surviving closing for a 12-month period; other offers were conditional on a satisfactory environmental review.

[54] Another potential purchaser made an offer to purchase in February 2017 at a price of $1,620,000. That offer was unacceptable to Sorbam because the offer contemplated a sizeable vendor takeback mortgage and the potential purchaser required leasehold improvements.

[55] The April 2017 offer to purchase that Sorbam ultimately accepted (and which resulted in the sale of the property) was conditional on Sorbam delivering and the purchaser being satisfied with,

[c]opies of any all [sic] appraisals, environmental assessments, Record of Site Condition...in the possession or under the control of the Vendor and relating to the Real Property or to property abutting the Real Property together with a letter of reliance by Geofirma Eng. Ltd. addressed to the Purchaser authorizing the Purchaser to rely on its reports and assessments.

[56] With the assistance of Geofirma Engineering Ltd., Sorbam had, in February 2016, filed a Record of Site Condition under Ontario Regulation 153/04.

Geofirma’s Involvement with 1770 Woodward and the Record of Site Condition

[57] In July 2012, Sorbam retained Geofirma to review the existing reports on 1770 Woodward and 1760 Woodward. In December 2013, Geofirma provided a supplementary Phase 2 ESA report on 1770 Woodward. The work conducted by Geofirma included installing four groundwater monitoring wells outside the building situated on the property and two groundwater monitoring wells inside the building, water level monitoring, hydraulic testing of the monitoring wells, and groundwater sampling of the newly installed monitoring wells.

[58] Based on the water level data, Geofirma inferred that groundwater flows onto the northwest quadrant of 1770 Woodward from 1760 Woodward. Geofirma found levels of PCE, TCE and/or DCE in shallow groundwater exceeding the MOE standards. These contaminants were found in monitoring wells in the northwest portion of the site. In summary, Geofirma concluded that:

[t]he available groundwater COC data and water level data provide a consistent and coherent hydrogeological interpretation that a plume of VOC groundwater contamination defined by PCE, TCE and cis-1,2-DCE has migrated onto the 1770 Woodward Drive property at levels exceeding applicable MOE (2011) standards from the adjoining property of 1760 Woodward Drive.

[59] From May to August 2013, Geofirma and Paterson Group conducted a joint groundwater monitoring program for 1770 Woodward and 1760 Woodward. The work involved re-surveying the existing groundwater monitoring wells on both Properties (Geofirma for 1770 Woodward and Paterson Group for 1760 Woodward), monthly monitoring of water levels, and sampling of all monitoring wells for VOCs.

[60] According to Geofirma, the results of the joint groundwater monitoring program showed that the “contoured” water level information was inconclusive concerning the groundwater flow direction between the two Properties. The uncertainty regarding the groundwater flow direction across the property line was due to the lack of groundwater monitoring wells on 1760 Woodward in areas other than the four corners of the building on that property.

[61] In March 2014, Geofirma prepared a remedial options assessment and cost estimate. The overall objective of the assessment was to determine the most appropriate and cost-effective plan for clean up/management of the site to meet MOE standards and to allow for completion of a Record of Site Condition for the property. As of March 2014, Geofirma determined that the preferred site remediation strategy involved the installation of a permeable reactive barrier wall, that would prevent on-site migration of COCs, at a total estimated cost of $245,000.

[62] Geofirma’s preferred remediation strategy as of March 2014 was based on the assumption that the use of 1770 Woodward might be changed to residential. However, as the MOE observed, this preferred remedial option would not remediate the source of the groundwater impacts on 1770 Woodward.

[63] In the end, a permeable reactive barrier was not installed on 1770 Woodward. Instead, Sorbam instructed Geofirma to proceed with a “risk assessment” approach[^3] to obtain a record of site condition.

[64] Records of site condition are addressed in Part XV.I of the EPA. Section 168.3 of the EPA provides for the establishment of the Environmental Site Registry, the purpose of which is to allow the filing of records of site condition and to facilitate public access to information contained in the records of site condition filed.

[65] The consequences of filing a record of site condition are set out in s. 168.7(1) of the EPA. Section 168.7(1) provides that if a record of site condition is filed with respect to a property, no order shall be issued by the MOE to, among others, the person who filed the record of site condition or a subsequent owner of the property. Section 168.7(1) does not apply if, after the certification date, any of the contaminant moved from the property to which the record of site condition relates to another property: EPA, s. 168.7(3). Importantly, s. 168.2(1) explicitly states that, subject to specified exceptions – none of which apply in the matter before the court – “this Part shall not be construed as affecting any cause of action that a person would have in the absence of this Part.”

The Expert Evidence at Trial

Engineering Evidence

[66] At trial, I heard expert evidence from Kenneth Raven, Carlos Da Silva, and Dr. Sonny Sundaram.

[67] Mr. Raven is a principal in and a senior hydrologist/engineer with Geofirma. Mr. Raven was called by Sorbam to provide expert testimony in the areas of hydrogeology and contaminant engineering. Mr. Raven first became involved with 1770 Woodward in July 2012 when Geofirma was asked to review the existing reports on 1760 Woodward and 1770 Woodward. Mr. Raven testified about the work conducted and the reports prepared by Geofirma in relation to 1770 Woodward, including the supplementary Phase 2 ESA of 1770 Woodward in December 2013, the remedial options assessment in March 2014, as well as the risk assessment work associated with the Record of Site Condition. Mr. Raven was also asked to comment on the environmental opinions provided by the engineers retained by 112Co. His reports were entered as exhibits at trial.

[68] Mr. Da Silva, an environmental engineer with Paterson Group, was called by 112Co to provide opinion evidence in the areas of contamination migration in water and soil. He testified about the work conducted and the reports prepared by Paterson Group in relation to 1760 Woodward. Mr. Da Silva also provided his opinion about Geofirma’s remedial options assessment.

[69] Dr. Sundaram is a senior hydrologist and senior associate with DST Consulting Engineers Inc. Dr. Sundaram was called by 112Co to provide expert opinion evidence in the areas of contamination and migration of contaminants and related issues, including remediation. Dr. Sundaram was retained by 112Co to conduct a historical review of the various environmental investigations completed at 1760 Woodward and 1770 Woodward. He prepared two reports, both of which were entered as exhibits at trial.

[70] The evidence of Mr. Raven, Mr. Da Silva, and Dr. Sundaram is discussed in more detail in the analysis section of these reasons.

Appraisal Evidence

[71] Mark Shore, an accredited appraiser with Shore Tanner, was called as an expert witness by Sorbam to provide his opinion as to the value of 1770 Woodward and the diminution in the property’s value because of the exceedances in the groundwater. Mr. Shore provided two reports on the diminution in value. Mr. Shore’s first report was prepared in October 2014 and was based on the unimplemented remediation plan proposed by Geofirma. The second report was prepared in February 2017.

[72] 112Co did not call expert evidence on this issue. I discuss Mr. Shore’s evidence in my consideration of damages.

Applicable Legal Principles and Statutory Framework

[73] As counsel for Sorbam submitted, Sorbam’s claim is based “in descending order of vigour” in nuisance, negligence, and under s. 99 of the EPA. My discussion of the applicable legal principles and the relevant statutory framework under the EPA proceeds in the same order.

Nuisance

[74] In Antrim Truck Centre Ltd. v. Ontario (Transportation), 2013 SCC 13, [2013] 1 S.C.R. 594, at para. 18, Cromwell J. wrote: “[A] nuisance consists of an interference with the claimant’s use or enjoyment of land that is both substantial and unreasonable.”

[75] Whether a particular interference is of sufficient severity to constitute a private nuisance is determined by evaluating whether the interference with the owner’s use or enjoyment of land is “substantial” – that is, “non-trivial” – and whether the interference is unreasonable in all of the circumstances: Antrim, at para. 19.

[76] A substantial injury to the complainant’s property interest is one that amounts to more than a slight annoyance or trifling interference: Antrim, at para. 22. In Tock v. St. John’s Metropolitan Area Board, [1989] 2 S.C.R. 1181, La Forest J. wrote at p. 1191 that actionable nuisances include “only those inconveniences that materially interfere with ordinary comfort as defined according to the standards held by those of plain and sober tests” and not those based “on the prompting of excessive ‘delicacy and fastidiousness’.”

[77] The evaluation of the unreasonableness of the interference is to be focused on the impact on the plaintiff’s property rights and not on the unreasonableness of the defendant’s conduct: Smith v. Inco, 2011 ONCA 628, at para. 40. As the Court of Appeal for Ontario put it in Smith, at paras. 39-40:

People do not live in splendid isolation from one another. One person’s lawful and reasonable use of his or her property may indirectly harm the property of another or interfere with that person’s ability to fully use and enjoy his or her property. The common law of nuisance developed as a means by which those competing interests could be addressed, and one given legal priority over the other...In essence, the common law of nuisance decided which party’s interest must give way. That determination is made by asking whether in all the circumstances the harm caused or the interference done to one person’s property by the other person’s use of his or her property is unreasonable...

The reasonableness inquiry focuses on the effect of the defendant’s conduct on the property rights of the plaintiff. Nuisance, unlike negligence, does not focus on or characterize the defendant’s conduct. The defendant’s conduct may be reasonable and yet result in an unreasonable interference with the plaintiff’s property rights. The characterization of the defendant’s conduct is relevant only to the extent that it impacts on the proper characterization of the nature of the interference with the plaintiff’s property rights...

[78] Foreseeability is not a necessary part of the tort of nuisance in Canada: Huang v. Fraser’s Hillary Limited, 2018 ONCA 527[^4], at para. 22.

[79] A landowner is not responsible for any nuisance created by their tenants unless “the use from which the damage or nuisance necessarily arises was plainly contemplated by the lease”: Sorbam (ONSC), at para. 33, citing Durling v. Sunrise Propane Energy Group Inc., 2013 ONSC 5830 (Div. Ct.), at para. 54. Sheard J. dismissed Sorbam’s claim against the Litwacks because she found there was no evidence that the damage or nuisance that may have arisen from the dry-cleaning operations on 1760 Woodward was plainly contemplated by the tenancy agreement. Indeed, no lease was produced on the motion: Sorbam (ONSC), at para. 34. The Court of Appeal affirmed the motion judge’s decision and observed that although the 2006 Paterson Group reports indicated there was some contamination on the lands now owned by 112Co, the reports did not require remediation and there was nothing to indicate the contamination had migrated to Sorbam’s land: Sorbam (ONCA), at para. 3.

[80] 112Co contends that it is in the same position as the Litwacks. I disagree. Like the Litwacks, 112Co was not the “spiller” of any contaminants; however, beginning in 2010, 112Co was provided with more information regarding the contaminants and, in particular, their migration. The distinction to be made between 112Co and the Litwacks is that this information was not available to the Litwacks. An owner of land who was not responsible for the creation of the nuisance may be liable if they continue the nuisance; that is, with knowledge of the nuisance, the landowner fails to take steps to put an end to the situation involving the nuisance: Fridman’s The Law of Torts in Canada, 2020, at p. 212, citing Turner v. Delta Shelf Co.(1995), 24 C.C.L.T. (2d) 107 (B.C.S.C.) and Sedleigh-Denfield v. O’Callaghan, [1940] A.C. 880 (H.L.). As has already been found, the Litwacks lacked the requisite knowledge.

[81] 112Co cannot avoid liability in nuisance merely because it did not spill the contaminants. As Lord Wright stated in Sedleigh-Denfield:

The responsibility which attaches to the occupier because he has possession and control of the property cannot logically be limited to the mere creation of the nuisance. It should extend to his conduct if, with knowledge, he leaves the nuisance on his land.

[82] Limiting responsibility to the “mere creation of the nuisance” would have the potential to leave a plaintiff without a remedy where a landowner or occupier refuses to address a continuing nuisance.

Negligence

[83] To establish liability in negligence, the plaintiff must show that: (i) the defendant owed the plaintiff a duty of care; (ii) the defendant breached their duty by failing to observe the relevant standard of care expected of a reasonable person in the circumstances; (iii) the breach of duty caused damage or loss to the plaintiff; and (iv) the damage was not too remote a consequence of the defendant’s breach: Fridman, at p. 364.

[84] The foreseeability requirement distinguishes negligence from nuisance: Huang, at para. 23.

Section 99 of the EPA

[85] Sorbam relies on s. 99(2)(a)(iii) of the EPA. Section 99 of the EPA provides in part:

(1) In this section,

“loss or damage” includes personal injury, loss of life, loss of use or enjoyment of property and pecuniary loss, including loss of income.

(2) Her Majesty in right of Ontario or in right of Canada or any other person has the right to compensation,

(a) for loss or damage incurred as a direct result of,

(i) the spill of a pollutant that causes or is likely to cause an adverse effect,

(ii) the exercise of any authority under subsection 100(1) or the carrying out of or attempting to carry out a duty imposed or an order or direction made under this Part, or

(iii) neglect or default in carrying out a duty imposed or an order or direction made under this Part;

(b) for all reasonable cost and expense incurred in respect of carrying out or attempting to carry out an order or direction under this Part,

from the owner of the pollutant and the person having control of the pollutant.

[86] An “owner of the pollutant” is defined in s. 91 of the EPA as:

...the owner of the pollutant immediately before the first discharge of the pollutant, whether into the natural environment or not, in a quantity or with a quality abnormal at the location where the discharge occurs, and “owner of a pollutant” has a corresponding meaning.

[87] A “person having control of a pollutant” is defined in s. 91 to mean:

...the person and the person’s employee or agent, if any, having the charge, management or control of a pollutant immediately before the first discharge of the pollutant, whether into the natural environment or not, in a quantity or with a quality abnormal at the location where the discharge occurs, and “person having control of the pollutant” has a corresponding meaning.

[88] Both definitions use the words “immediately before the first discharge of the pollutant.” There is no dispute that 112Co was not the “spiller” or “discharger” of any contaminants. 112Co cannot be either the “owner of the pollutant” or “a person having control of a pollutant” as defined. Accordingly, Sorbam’s claim under s. 99 of the EPA cannot succeed.

[89] I turn then to the claims made in nuisance and negligence.

Analysis

Did Contaminants Migrate from 1760 Woodward to 1770 Woodward?

[90] With respect to both nuisance and negligence, the first factual issue I must determine is whether the contaminants migrated from 1760 Woodward to 1770 Woodward. If I determine there was no migration of contaminants from 112Co’s property to 1770 Woodward, Sorbam’s claim against 112Co must fail. For the following reasons, I find that the contaminants did migrate from 1760 Woodward to 1770 Woodward.

(i) No Evidence of Source at 1770 Woodward

[91] There was no credible evidence of any potentially contaminating activity at 1770 Woodward. Paterson Group’s 2006 Phase I and Phase II ESAs did not identify any historic uses of concern of 1770 Woodward.

[92] On cross-examination, Mr. Da Silva acknowledged that September 2011 was the first time Paterson Group identified 1770 Woodward as the likely source of the contaminants. I note that Paterson Group’s opinion in this regard emerged only after Sorbam put 112Co on notice of the alleged migration of contaminants from 1760 Woodward to 1770 Woodward.

[93] Paterson Group did not identify potential sources of contaminants located on 1770 Woodward until September 2014. Of the two potential sources identified by Paterson Group in 2014, Mr. Da Silva candidly acknowledged, “I don’t know anything about them.” His comment that someone may have poured PCE or TCE “down the sink” at 1770 Woodward is speculative at best.

[94] Dr. Sundaram also acknowledged on cross-examination that he had no concrete evidence of any contaminants migrating from 1770 Woodward to 1760 Woodward.

[95] Only Mr. Raven investigated the business activities of the two potential sources belatedly identified by Paterson Group in 2014. Mr. Raven testified that the type of businesses carried on by these potential sources would not have involved the use of PCE or TCE. I accept Mr. Raven’s evidence on this issue.

[96] The record does not support a finding that the source of the contamination was located on 1770 Woodward.

(ii) Source of PCE at 1760 Woodward

[97] In 2006, Paterson Group identified a dry-cleaning operation that had historically operated at 1760 Woodward. SLR Consulting also noted that a dry-cleaning business had operated at 1760 Woodward. Both Paterson Group and SLR Consulting recommended Phase II ESAs be conducted for this very reason. In December 2010, Pinchin also observed that the contaminant impacts on 1770 Woodward likely migrated from a dry-cleaning facility that had historically operated on the property to the north.

[98] The highest readings of PCE and TCE in soil were found in Borehole 6-15 at 1760 Woodward. Mr. Raven testified that this reading was more than ten times higher than any PCE concentration measured in the soil at 1770 Woodward. Significantly, Borehole 6-15 is located under the building at 1760 Woodward. Mr. Trimper and Mr. Raven both testified that higher PCE concentrations in soil are found near the source of the contaminants.

[99] These PCE and TCE concentrations did not exceed the applicable MOE standards; however, it was Mr. Raven’s evidence that the measured concentrations provide information on the likely groundwater concentrations that would have been in equilibrium with these soil concentrations and likely source areas for the identified VOC groundwater contamination. Using the measured soil concentrations, Mr. Raven calculated a “porewater concentration” that is in equilibrium with the soil concentration. It was Mr. Raven’s evidence that the calculated PCE concentrations in the groundwater at Borehole 6-15 are higher than any PCE concentrations measured in the groundwater monitoring wells on either property since groundwater monitoring began in 2006 (for 1760 Woodward) and 2010 (for 1770 Woodward).

[100] In Mr. Raven’s opinion, these calculated PCE concentrations indicate that (a) a source of PCE exists in the soil in the vicinity of Borehole 6-15 on 1760 Woodward near the groundwater table, and (b) that the soil PCE source is the source of dissolved PCE, TCE, and DCE plumes occurring at 1770 Woodward and 1760 Woodward.

[101] Using the same method, Mr. Raven calculated the TCE concentrations in the groundwater at Borehole 6-15. Mr. Raven found that the TCE concentrations in the groundwater as this borehole were (a) much lower in comparison to the PCE concentrations, and (b) comparable to the measured TCE concentrations in the monitoring wells on both 1770 Woodward and 1760 Woodward. In Mr. Raven’s opinion, this result indicates that the TCE concentrations in the soil underneath the floor slab of the building at 1760 Woodward are likely derived from sorption of TCE in groundwater to soil; they do not suggest an independent source of TCE exists at 1760 Woodward. Rather, in Mr. Raven’s opinion, the presence of TCE and DCE on both 1770 Woodward and 1760 Woodward is accounted for by the degradation of PCE.

[102] Dr. Sundaram was highly critical of Mr. Raven’s application of the “instantaneous equilibrium partitioning” method to calculate PCE concentrations in groundwater. Dr. Sundaram stated in his report that Mr. Raven’s application of this method to estimate “hypothetical concentrations of PCE in pore water” and to claim that these “higher concentrations constitute potential source areas” does not accord with the original intent of the method.

[103] There are at least two responses to Dr. Sundaram’s criticisms. First, Mr. Raven was clear in his report that the measured groundwater plume concentrations would be lower than the calculated numbers due to dilution caused by flowing groundwater. Second, notwithstanding Dr. Sundaram’s critique, it remains the case that the measured readings of PCE in the soil underneath the building at 1760 Woodward were more than ten times higher than the PCE soil concentration measured at 1770 Woodward.

[104] I note, as well, that although Dr. Sundaram identified in his report a number of potentially contaminating activities in neighbouring properties, he acknowledged on cross-examination that he had no concrete evidence of any contaminants migrating from any of those properties to 1770 Woodward.

[105] Based on this evidence, I find that the PCE source is located on 1760 Woodward, in the vicinity of Borehole 6-15, located underneath the floor slab of the building.

(iii) Migration Pathways in the Soil

[106] The experts and Mr. Trimper agreed that groundwater flow direction is not the only means to determine contaminant migration. Contaminant migration may also occur through migration pathways in soil. However, there was disagreement as to whether migration pathways existed in the soil of both 1770 Woodward and 1760 Woodward.

[107] Mr. Raven testified that the contaminant plume at 1770 Woodward is in the silty, sandy clay layer at a depth of about four metres. His evidence is that the soil stratigraphy at 1770 Woodward showed permeable pathways – layers of sand lenses or seams – in the upper four metres; these permeable pathways would allow for the movement of contaminants. The borehole logs for ten of the monitoring wells on 1770 Woodward show the presence of distinct permeable sand layers in the shallow soil, to depths of around three to four metres.

[108] In Mr. Raven’s opinion, similar permeable sand seams exist at 1760 Woodward. In support of his opinion, Mr. Raven explained that if the monitoring wells installed by Paterson Group were installed in clay without sand lenses, Paterson Group would not have been able to purge the wells and sample them within days as they were, in fact, able to do. Instead, it would have taken weeks for wells installed in clay to recharge with water.

[109] Mr. Raven was critical of Paterson Group’s borehole logs because they were lacking in detail. Even so, there was some direct evidence that sand lenses existed on both Properties. It was Dr. Sundaram’s evidence that the logs for Boreholes 1 and 2 at 1760 Woodward showed loose, silty sand. Borehole 1 is located in the southwest corner of the property, at the property line of 1770 Woodward; Borehole 2 is in the opposite corner of the property.

[110] Dr. Sundaram also identified sand at Monitoring Wells 1, 2, and 9 at 1770 Woodward. Dr. Sundaram testified that the identification of sand at these locations shows contiguous material which could have permitted the migration of contaminants from 1770 Woodward to 1760 Woodward. There was, however, no evidence of a source of contaminants at 1770 Woodward.

[111] On the weight of the evidence, I am satisfied that permeable material existed in the soil which would have allowed for the transport of contaminants from 1760 Woodward to 1770 Woodward.

(iv) Groundwater Flow Direction

[112] One of the most contentious issues is the groundwater flow direction.

[113] There was consensus among the experts that groundwater elevations fluctuate seasonally. There was also agreement that utility trenches, known to exist along Woodward Drive, can influence shallow groundwater flow. The consensus ends there.

[114] Beginning in 2006, Paterson Group consistently inferred the groundwater flow direction on 1760 Woodward as northwesterly from the southeast corner of the property to the northwest corner. Paterson Group did not interpret the groundwater flow direction at 1770 Woodward or across the property line between the Properties.

[115] SLR Consulting interpreted the groundwater flow direction at 1770 Woodward Drive as being towards the west to southwest. Bruce Cochrane, an environmental consultant who was previously employed by SLR Consulting, testified that the groundwater contours used by SLR Consulting were based on all of the groundwater wells at 1770 Woodward.

[116] Mr. Raven testified that the well pairings that straddle the property line between the Properties indicate that the groundwater elevations at 1770 Woodward are higher than those at 1760 Woodward. In conducting detailed water readings at 1770 Woodward, Geofirma observed fluctuations of up to 0.3 metres over the course of a year. According to Mr. Raven, this fluctuation indicates that at certain times of the year, the groundwater between the Properties flows from north to south, that is, from 1760 Woodward to 1770 Woodward.

[117] As part of their risk assessment work, Geofirma prepared groundwater contours for 1770 Woodward. The groundwater flow interpretation by Geofirma shows variations in the groundwater flow across the site, with groundwater flow in the northwest quadrant towards the west-southwest of the property. Geofirma’s inferred groundwater flow direction across 1770 Woodward is consistent with the direction of the contaminant plume.

[118] DST Consulting also prepared groundwater contours for the Properties. I found Dr. Sundaram’s evidence on the groundwater flow direction to be of limited assistance for five reasons. First, DST Consulting conducted no groundwater monitoring or sampling of their own; instead, they relied on groundwater elevation data collected in 2013.

[119] Second, the data used by DST Consulting to predict groundwater flow direction was limited: they used only data from four corner monitoring wells at 1760 Woodward and they did not consider Monitoring Well 1 at 1770 Woodward in preparing their contours. Monitoring Well l – located at the northwest corner of 1770 Woodward – showed exceedances of PCE, TCE, and DCE. On cross-examination, Dr. Sundaram ultimately agreed that it would be better to use groundwater elevations from more wells when predicting groundwater flow direction. As Mr. Raven testified, the more monitoring wells are used for data points, the better the contours, and the more reliable the interpretation.

[120] Third, the groundwater contours drawn by DST Consulting depict a groundwater flow direction of west to southwest across 1770 Woodward, with a change in flow northward on the other side of the property line on 1760 Woodward. On cross-examination, Dr. Sundaram conceded that a 90-degree change in groundwater direction “is not what is normal.”

[121] Fourth, the groundwater flow directions proposed by Dr. Sundaram and DST Consulting (as well as Paterson Group) are perpendicular to and therefore inconsistent with the direction of the contaminant plume.

[122] Fifth, and finally, Dr. Sundaram testified that he took no issue with the DCE plume as depicted in Paterson Group’s July 2015 delineation report, a depiction that Mr. Raven testified reflects the migrations of contaminants from 1760 Woodward to 1770 Woodward. I note that the DCE contaminant plume drawn by Paterson Group is consistent with that drawn by Geofirma.

[123] Dr. Sundaram challenged Mr. Raven’s conclusion that the joint groundwater monitoring study in the summer of 2013 was inconclusive regarding the groundwater flow direction across the property line. In Mr. Raven’s opinion, the study was inconclusive on this issue because of the lack of groundwater monitoring wells on 1760 Woodward in areas other than the four corners of the building. Mr. Raven testified that having four monitoring wells was just one monitoring well above the “bare minimum.” As Mr. Raven explained, if there had been more wells, there would have been more information points, and more information points would have resulted in a more reliable interpretation as to the groundwater flow direction. Mr. Raven’s explanation accords with logic and common sense. Even Dr. Sundaram agreed on cross-examination that increasing the number of boreholes would provide a better prediction of the groundwater flow direction.

[124] On the groundwater flow direction issue, I prefer the evidence of Mr. Raven to that of Dr. Sundaram and Mr. Da Silva. Mr. Raven’s evidence accounted for seasonal fluctuations in the groundwater elevations and was based on more data points. Most importantly, however, Geofirma’s inferred groundwater flow direction across 1770 Woodward from the northwest quadrant towards the west-southwest is consistent with the direction of the contaminant plume. It is the behaviour of the contaminant plume to which I next turn.

(v) The Behaviour of the Contaminant Plume

[125] In his December 2016 memorandum, Mr. Trimper explained that the shape of the identified chlorinated solvent plume was consistent with a southwesterly groundwater flow direction. He noted that impacts had been reported in all areas of 1760 Woodward, including Borehole 2, located near the northeast corner of the property. Mr. Trimper explained that higher concentrations of the daughter products – TCE and DCE – would be expected in groundwater downgradient of the contaminant source, while concentrations of PCE would decrease. Mr. Raven’s evidence was the same as Mr. Trimper’s on this point.

[126] The evidence of Mr. Raven and Mr. Trimper is consistent with the results of the 2015 work performed by Paterson Group and Geofirma. The highest PCE concentration was located on 1760 Woodward, underneath the building. The highest DCE concentrations were found in the monitoring wells at 1770 Woodward near the northern property line with 1760 Woodward. As of 2015, there were no PCE exceedances in the groundwater at 1770 Woodward; the only exceedances at 1770 Woodward were of the daughter products.

[127] According to Mr. Trimper, the shape of the plume showed “classical” behaviour because of its migration from an upgradient source.

[128] It was Mr. Raven’s evidence that the PCE soil concentrations measured at the borehole under the building at 1760 Woodward could not have migrated there as a dissolved plume from 1770 Woodward. There was no current or historical evidence of elevated VOC concentrations in the soil or in the groundwater upgradient of the contamination found under the floor slab at 1760 Woodward; therefore, according to Mr. Raven, it is not hydrogeologically possible for the source of the contamination at 1760 Woodward to be located southeast of the property. Finally, the geometry of the PCE, TCE, and DCE plumes on both Properties are consistent with a VOC plume that migrated west-southwest to southwest from 1760 Woodward to 1770 Woodward.

[129] In arriving at his opinion that there was a contaminant source at 1770 Woodward, Dr. Sundaram focused on the fact that the “contaminant mass”, being the total of PCE, TCE, and DCE, was higher at 1770 Woodward. I prefer the evidence of Mr. Raven and Mr. Trimper that the higher concentrations of the daughter products on 1770 Woodward are more indicative of a downgradient plume. Their evidence better accounts for the known degradation of PCE into TCE and DCE. Dr. Sundaram agreed that as PCE moves downgradient, it breaks down into its daughter products.

[130] In addition, Mr. Raven used the same formula used by Dr. Sundaram in his report to reconstruct the original concentrations required to generate the TCE and DCE concentrations and then plotted the resulting plume. That plume extends from a contaminant source under the floor slab of the building at 1760 Woodward towards the northwest corner of 1770 Woodward Drive.

[131] I find that the behaviour of the contaminant plume is consistent with contaminant migration from 1760 Woodward to 1770 Woodward.

(vi) Summary

[132] In summary, I find:

(i) the source of the contaminants was located on 1760 Woodward, underneath the building;

(ii) migration pathways existed in the soil of the Properties;

(iii) the groundwater flow direction across 1770 Woodward is from the northwest towards the west-southwest; and

(iv) the behaviour and shape of the contaminant plume are consistent with contamination migrating from 1760 Woodward to 1770 Woodward.

[133] Based on these findings, I find that the contaminants migrated from 1760 Woodward to 1770 Woodward.

112Co’s Knowledge of the Migration of Contaminants

[134] 112Co’s knowledge of the migration of contaminants is relevant to both nuisance and negligence. With respect to nuisance, as I have already discussed, although 112Co did not cause the migration of the contaminants, 112Co may be liable if, with knowledge, it allowed the migration of the contaminants to continue. As Roach J. wrote in Schoeni v. King, [1943] O.R. 478 (Ont. Sup. Ct.), aff’d at [1944] O.R. 38 (Ont. C.A.):

The occupant of property will be liable for a nuisance not created by him, and even though it has arisen without his own act or default, if he omits to remedy it within a reasonable time after he knows of its existence, or ought to have become aware of it.

[135] This necessitates an inquiry as to what 112Co knew and when. Before reviewing Mr. Wall’s testimony, I will address 112Co’s submission that there is no evidence that the migration of contaminants continued onto 1770 Woodward after 112Co was put on notice of Sorbam’s concerns in 2010.

Continued Migration of Contaminants

[136] The various engineering reports filed in evidence support a finding that, contrary to 112Co’s submission, the migration of contaminants continued after 2010.

[137] The experts agreed that as PCE moves downgradient, it breaks down into its daughter products, TCE and DCE. Over time, higher concentrations of the daughter products were identified on 1770 Woodward, indicative of the continued migration of the contaminants. In addition, the measured concentrations of PCE in Monitoring Wells 1B, 4 and 6 on 1770 Woodward – all of which were located close to the northern boundary with 1760 Woodward – increased over time.

[138] In December 2016, Mr. Trimper recommended that 112Co should be required to delineate the extent of the chlorinated solvent impacts in all directions and to provide a plan on how to manage and address the contamination. As at this time, the MOE considered the contaminant migration to be of an ongoing nature.

[139] I find that the migration of contaminants from 1760 Woodward to 1770 Woodward continued after 112Co was put on notice in 2010. I further find that there was an appreciable increase in the environmental contamination of 1770 Woodward subsequent to 2010.

Mr. Wall’s Testimony

[140] 112Co contends that it did everything it could to investigate the contamination issue. I disagree. Based on the whole of the evidence, including Mr. Wall’s testimony, I find that 112Co made a calculated decision to ignore the situation to the point where the MOE was required to issue a Provincial Officer’s Order against the company.

[141] Mr. Wall testified that the Litwacks agreed to conduct an environmental assessment of 1760 Woodward, “probably because my bank required it.” He acknowledged receiving copies of the 2006 and 2007 Paterson Group reports. He testified that he was not aware of the source of the contamination and that he was “instructed” not to worry about it.

[142] Mr. Wall acknowledged receiving the August 2010 letter from Sorbam’s counsel; however, he testified that he “didn’t remember it going back to 2010.” The August 2010 letter enclosed SLR Consulting’s Phase II ESA of 1770 Woodward. SLR Consulting recommended submission of its report to the MOE, implementation of a quarterly groundwater monitoring program, and the remediation of groundwater impacts through in situ oxidation. On cross-examination, Mr. Wall testified that he was, at trial, seeing these recommendations for the first time.

[143] Mr. Wall was cross-examined on his contacts with the MOE. Mr. Wall appeared to be intent on explaining away or minimizing the delays involved. He testified that he did not “personally receive” the MOE’s May 20, 2011 letter addressed to him, emphasizing that the notes on the letter were in his ex-wife’s handwriting. The MOE’s letter requested a work plan be provided by June 28, 2011. The evidentiary record reflects that 112Co did not provide a response to the MOE until 2014. Mr. Wall professed surprise at the extent of the delay in 112Co’s response.

[144] On cross-examination, Mr. Wall agreed that he told the MOE that a Phase II ESA had been conducted on 1760 Woodward and would be provided to the MOE. In fact, what was provided was Paterson Group’s September 2011 report. Mr. Wall acknowledged that the report requested by the MOE was not provided until 2015, only after the MOE issued the Provincial Officer’s Order in February 2015. In his words, it was “all a big headache” and there were “thousands of pages of documents.”

[145] In summary, I find that, (a) by August 2010, 112Co was aware of Sorbam’s concerns based on SLR Consulting’s Phase II ESA report, and (b) 112Co refused to cooperate with Sorbam regarding access to 1760 Woodward so that additional testing could be conducted. The MOE became involved with both Properties in 2011. I agree with Sorbam’s submission that 112Co was given ample notice by the MOE that 1760 Woodward was the source of the problem.

[146] I find as follows:

(i) at the latest, 112Co had knowledge of the contaminant migration issue in May 2011;

(ii) 112Co allowed the migration of the contaminants to continue after this date;

(iii) 112Co failed to take steps to address the problem within a reasonable period of time thereafter; and

(iv) as a result of 112Co’s inaction, there was increased environmental contamination of 1770 Woodward and Sorbam suffered additional harm.

[147] Huang v. Fraser Hillary’s Limited, 2017 ONSC 1500 does not, in my view, assist 112Co. The primary issue for determination at trial was liability for the remediation of the environmental contamination (by chemicals used in dry-cleaning operations) of the plaintiff’s real property. Roger J. dismissed the plaintiff’s claim against Mr. Hillary because the plaintiff failed to establish that any inaction on Mr. Hillary’s part after he became aware of the contamination caused any substantial interference with the plaintiff’s properties: Huang (ONSC), at para. 155. The opposite is true in the matter now before the court.

Was the Interference with Sorbam’s Use or Enjoyment of 1770 Woodward Substantial and Unreasonable?

[148] With respect to the claim in nuisance, 112Co asserts that the contamination migration did not constitute a substantial and unreasonable interference with Sorbam’s use or enjoyment of 1770 Woodward. 112Co submits that (a) no risk to health or human safety was posed by the contaminants, and (b) the property was not rendered unfit for use. 112Co emphasizes that the certificate attached to the risk assessment for 1770 Woodward filed with the MOE (part of the Record of Site Condition process) states no risk management plan is necessary and the contaminants do not pose a risk to health and human safety.

[149] 112Co relies on Smith v. Inco, 2011 ONCA 628, at para. 55, where the Court of Appeal concluded that the trial judge erred in finding that nickel particles in the soil caused actual, substantial, physical damage to the claimants’ lands:

In our view, a mere chemical alteration in the content of the soil, without more, does not amount to physical harm or damage to the property...To constitute physical harm or damage, a change in the chemical composition must be shown to have had some detrimental effect on the land itself or rights associated with the use of the land.

[150] Nuisance may take a variety of forms. Those forms may include interference with the health, comfort, or convenience of the owner or occupier; they may also include actual physical damage to the land: Antrim, at para. 23, citing Tock, at pp. 1190-91. The above-cited passage from Smith also supports this proposition.

[151] Physical damage to the land may include business loss and a decrease in the market value of the land: see Antrim, at para. 49. As the Supreme Court of Canada stated, “[t]he point is not that there is a typology of actionable interferences; the point is rather that there is a threshold of seriousness that must be met before an interference is actionable”: Antrim, at para. 23. The Supreme Court of Canada also made it clear in Antrim that the reasonableness inquiry must be undertaken when the interference is physical or material: Antrim, at para. 48.

[152] I have no hesitation in finding that there was physical damage to 1770 Woodward as a result of the continued migration of contaminants from 1760 Woodward. Mr. Shore testified as to the diminution in market value of the property as a result of the contamination. There was evidence that the environmental issues prolonged the sales process for the property and that, over time, the price offered for the property decreased. I find that the physical damage to 1170 Woodward meets the threshold of “substantial.”

[153] In Antrim, at para. 50, Cromwell J. recognized that, where there is significant and permanent harm caused by an interference, the reasonableness analysis may be brief. Here, a lengthy balancing analysis is not required; there is uncontradicted evidence that the interference, as found, reduced the market value of 1770 Woodward by $1,200,000. I readily conclude that the interference was, in fact, unreasonable.

Conclusion on Nuisance

[154] I find that the migration of contaminants from the source on 1760 Woodward to 1770 Woodward constituted a nuisance. Despite having knowledge of the nuisance no later than 2011, 112Co failed to take appropriate steps to address the problem. 112Co ignored the MOE’s requests and acted only when confronted by the Provincial Officer’s Order. 112Co did not create the nuisance but, in allowing it to continue, 112Co is liable to Sorbam for the damages caused. I deal with the issue of damages below.

Negligence

[155] I also find 112Co liable in negligence.

[156] As an adjoining landowner, 112Co owed Sorbam a duty of care to avoid acts or omissions that may cause harm to adjoining landowners: Canadian Tire Real Estate Ltd. v. Huron Concrete Supply Ltd., 2014 ONSC 288, at para. 299; Midwest Properties Ltd. v. Thordarson, 2015 ONCA 819, at para. 109.

[157] I find that 112Co failed to comply with the standard of care expected of a reasonable landowner. 112Co knew or ought to have known of the contaminant migration in 2011 when it was put on notice by the MOE. I reject the submission that 112Co was “trying to determine how it should respond”: the MOE told 112Co what was expected.

[158] Instead, 112Co, through its principal Mr. Wall, made a calculated decision to ignore the MOE and its requests that 112Co address the migration of contaminants onto 1770 Woodward. Mr. Wall provided false information to the MOE regarding a Phase II ESA on 1760 Woodward. 112Co responded fully to the MOE only after the Provincial Officer’s Order was issued.

[159] Mr. Wall’s testimony that it was “all a big headache” is telling. It is clear from his actions or, more accurately, his inaction, that he wanted to ignore the problem entirely. This behaviour is not consistent with the standard of care expected of a reasonable landowner – to limit harm to their neighbours in the circumstances.

[160] Based on my findings that the migration of contaminants onto 1770 Woodward was of a continuing nature, there was an appreciable increase in environmental contamination after 2010, and the increase in environmental contamination was the result of 112Co’s inaction, I conclude that 112Co’s breach of duty caused damage to Sorbam.

[161] 112Co argues that Sorbam should not be put in a better position than when the actions of 112Co “intervened.” 112Co also says that there cannot be a “worsening of the condition” of 1770 Woodward now that the Record of Site Condition is in place. The foundation of 112Co’s argument appears to rest on: (i) the fact that 112Co was not the “spiller” of the chemicals; and (ii) a misapprehension of the impact of the Record of Site Condition.

[162] To address the first point: after it was put on notice, 112Co allowed the migration of the contaminants to continue. 112Co did not permit Sorbam and its representatives to have access to 1760 Woodward in an effort to delineate the extent of the contamination. 112Co largely stymied the MOE, necessitating the issuance of the Provincial Officer’s Order.

[163] Mr. Quinn’s evidence that the environmental problems associated with 1770 Woodward prolonged the sale process and, over time, adversely impacted the sale price is uncontroverted. Although 112Co was not the “spiller”, 112Co failed to take reasonable steps to address the continuing migration of contaminants of which it had knowledge. By its inaction, 112Co caused material harm to Sorbam.

[164] As for the second point: a record of site condition is, in essence, a risk assessment approach that provides a landowner or a prospective purchaser with a “level of comfort” in relation to the MOE, and precludes further orders being issued by the MOE in relation to the property. However, a record of site condition does not preclude or affect causes of action. Most significantly, the Record of Site Condition filed in relation to 1770 Woodward does not address the diminution in the market value of the property.

[165] I next turn to the issue of damages.

Damages

[166] Sorbam claims damages in the amount of approximately $200,000 for engineering and consulting expenses and $1,200,000 for the diminution in the market value of 1770 Woodward.

[167] It is clear from the authorities that damages may be awarded for diminution in property value which results from the continued presence of contamination: Midwest Properties, at paras. 55 and 62; see also Smith. Although the Court of Appeal in Midwest Properties expressed a preference to award restoration costs rather than damages, in this case, remediation is not possible because Sorbam has sold the property.

Engineering Expenses

[168] At trial, Sorbam filed a brief of its engineering and consulting expenses. Based on the invoices in evidence, $91,307.21 was charged by Geofirma in connection with its risk assessment work and obtaining the Record of Site Condition. 112Co argues that Sorbam failed to mitigate its expenses because a record of site condition could have been obtained earlier, for less. 112Co points to Geofirma’s 2014 estimate to obtain a record of site condition in the amount of approximately $25,000.

[169] I am not persuaded by this submission. Simply because the expenses proved to be greater than estimated does not mean that the expenses actually incurred are not reasonable. I find that the expenses associated with obtaining the risk assessment and the Record of Site Condition were warranted to facilitate the sale of 1770 Woodward.

[170] Nor, in my view, does it lie with 112Co to suggest that Sorbam should have acted earlier to obtain the Record of Site Condition, when 112Co refused to cooperate with Sorbam in 2010 to delineate the extent of the contaminant plume and all but ignored the MOE for years, responding only when the Provincial Officer’s Order was issued. The remediation plan proposed in 2014 by Geofirma was not implemented because it would not have had the effect of addressing the source of the contaminants on 1760 Woodward and their continued migration onto 1770 Woodward.

[171] Sorbam is entitled to recover pecuniary damages in the amount of $91,307.21, representing the engineering expenses associated with the risk assessment and the Record of Site Condition.

[172] I do not, however, award any damages in respect of the balance of the engineering and consulting expenses claimed by Sorbam. Based on my review of the remaining invoices filed in evidence, it appears that the balance of the expenses claimed fall into three broad categories: (i) the “pre-notice” work done by SLR Consulting and Pinchin; (ii) work done by Geofirma identified on the invoices to be in the nature of “litigation support”; and (iii) work done by Geofirma that was not clearly referable to the risk assessment work and the Record of Site Condition.

[173] First, I do not allow recovery for the expenses associated with the work done by SLR Consulting and Pinchin prior to notice being given to 112Co; these costs would have been incurred by Sorbam regardless of 112Co’s conduct. Second, the litigation support work performed by Geofirma is not recoverable as damages in the action. Third, I do not allow recovery for work conducted by Geofirma where it has not been proven that such work was required to facilitate the sale of the property through the obtaining of the Record of Site Condition.

Diminution in Market Value

[174] Mr. Shore provided two appraisal reports on 1770 Woodward: the first in October 2014, and the second in February 2017. He was asked to estimate the reduction in market value to 1770 Woodward because of exceedances in the groundwater originating from 1760 Woodward.

[175] Mr. Shore’s October 2014 report is of marginal relevance to the assessment of damages based on the diminution in market value of 1770 Woodward. That report was prepared based on a remediation plan proposed by Geofirma that was, in the end, not implemented. For this reason, Mr. Shore was asked in February 2017 to revisit his appraisal.

[176] In his February 2017 report, Mr. Shore estimated the reduction in market value to be $1,200,000, or 40 per cent of $3,000,000, $3,000,000 being Mr. Shore’s opinion of the market value of 1770 Woodward if the property had not been impacted by the contaminants.

[177] Mr. Shore outlined three approaches to market valuation: (i) the direct comparison approach; (ii) the income approach; and (iii) the cost approach. Mr. Shore used the direct comparison approach to estimate the market value of 1770 Woodward. He explained that the income approach would typically be used where a building is fully leased. Mr. Shore explained that he did not use the income approach in this case to estimate value because the majority of 1770 Woodward was vacant and the property was not marketable as an income-producing property; therefore, the income approach would not provide a meaningful indication of value.

[178] The cost approach attempts to replicate the cost to replace the building on site; the cost approach would require that accrued depreciation be estimated and would, according to Mr. Shore become very subjective.

[179] The direct comparison approach is based on the principle of substitution: a purchaser will pay no more for a property than the cost of acquiring an equally desirable substitute property, provided there is no undue delay in making the acquisition. Four comparable sales of commercial office buildings were located and reviewed, all of which were sold with vacant possession. In order to provide a consistent method of comparison, the selling price of each sale was expressed in terms of a selling price/sq. ft. of gross floor area. This yielded a range of value from $145/sq. ft. to $192/sq. ft.

[180] Mr. Shore assessed the overall comparability of each of these four comparable sales to 1770 Woodward. In Mr. Shore’s opinion, the comparable property with a sale price equal to $145/sq. ft. provided the best indication of the market value of 1770 Woodward had it not been impacted by subsurface contaminants. The $145/sq. ft. price reflected the poor physical condition of the building at 1770 Woodward. Using $145/sq. ft., Mr. Shore estimated the market value of 1770 Woodward as if it had not been impacted to be $3,000,000.

[181] After estimating the market value of 1770 Woodward as if it had not been impacted by subsurface contaminants, Mr. Shore then considered four case studies involving sales in 2016 of commercial properties impacted by exceedances in subsurface compounds in either the soil or groundwater. Price reductions were observed in each case, ranging from 18 to 48.1 per cent of the otherwise agreed to purchase price or the appraised value as if not impacted by subsurface compounds. In Mr. Shore’s opinion, the first case study was the most relevant given the source of the exceedances in the groundwater and the migration under the building. In that case, the price reduction was 38.9 per cent. Therefore, Mr. Shore estimated the reduction in market value to 1770 Woodward to be 40 per cent of the market value had the property not been impacted by subsurface compounds.

[182] 1770 Woodward ultimately sold in April 2017 for $1,600,000. The sale price provides some validation for Mr. Shore’s estimate of market value, taking into account the impact of subsurface contaminants – $1,800,000.

[183] 112Co challenged Mr. Shore’s evidence, in part, on the basis of his October 2014 report. In his 2014 report, Mr. Shore provided two valuation scenarios: the first, in which the vendor paid for site remediation, and the second, in which the purchaser paid for site remediation. I note that both scenarios used a hypothetical current market value with no contamination of $3,000,000, the same value used in his 2017 report. Both scenarios assumed the filing of a record of site condition, and both scenarios assumed the site remediation recommended by Geofirma would commence immediately. As I have observed, the proposed remediation plan was not implemented. In my view, Mr. Shore’s October 2014 report does not, in any way, undermine the opinions and conclusions he reached in 2017.

[184] Mr. Shore was not challenged on his qualifications. I accept Mr. Shore’s uncontradicted evidence as to the diminution in market value of 1770 Woodward. Mr. Shore’s opinion recognized that 1770 Woodward was not an income-producing property and took into account the relatively poor physical condition of the building. I find that the contamination migrating from 1760 Woodward reduced the market value of 1770 Woodward by $1,200,000.

[185] The evidence does not support a finding that Sorbam’s efforts to sell 1770 Woodward were inadequate, as was suggested by 112Co. Mr. Quinn testified that his office received between 300 and 500 inquiries about 1770 Woodward, but the environmental condition of the property proved to be a stumbling block each time. The uncontradicted evidence at trial was that, without the “environmental situation” as a result of the continuing contaminant migration from 1760 Woodward, 1770 Woodward would have sold more quickly than it did and for a higher price.

[186] 112Co advances the argument that Sorbam did not mitigate its damages because, according to 112Co, Sorbam could have sold 1770 Woodward to the ultimate purchaser in 2010 had it obtained a record of site condition at an earlier date. I disagree.

[187] 112Co’s argument is speculative. I also note that Sorbam mandated Geofirma to prepare a remedial options assessment. As at March 2014, Geofirma’s preferred remediation strategy involved a barrier wall. In the end, the barrier wall option was not implemented, in part, because it would not address the original source of the contaminant impacts. It cannot be said by 112Co that Sorbam failed to mitigate its damages when the professional advice Sorbam received was not implemented because 112Co itself refused to act.

[188] Sorbam is entitled to damages in the amount of $1,200,000 for diminution in market value of 1770 Woodward.

Conclusion

[189] I find 112Co liable to Sorbam in nuisance and in negligence. Judgment is granted to Sorbam for damages in the total amount of $1,291,307.21, together with prejudgment and postjudgment interest under s. 128 and s. 129, respectively, of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[190] In the event the parties are unable to agree on costs, they may provide their submissions in writing. Sorbam is to provide its submissions by August 31, 2021. 112Co is to provide its responding submissions by September 30, 2021. Submissions are not to exceed five pages, excluding any bill of costs and authorities.

[191] I wish to thank counsel for their professionalism throughout.

Madam Justice Robyn M. Ryan Bell

Released: July 29, 2021

[^1]: Sorbam Investments Ltd. v. Litwack, 2017 ONSC 706, aff’d 2017 ONCA 850. [^2]: The name of the relevant Ministry has evolved over time and is currently known as the Ministry of the Environment, Conservation and Parks. For simplicity, I have used “MOE” throughout these Reasons. [^3]: Using the “Modified Generic Risk Assessment” approach. [^4]: Leave to appeal to S.C.C. refused: 2019 SCC.