863880 Ontario Limited v. Canadian Pacific Railway Company, 2022 ONSC 3754

COURT FILE NO.: CV-04-CV262689

MOTION HEARD: 20220511

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 863880 Ontario Limited, Plaintiff

AND:

Canadian Pacific Railway Company and Oxford Properties Group Inc., Defendants

BEFORE: Associate Justice B. McAfee

COUNSEL: J. Buhlman and N. Sidlar, Counsel, for the Moving Party, the Plaintiff 863880 Ontario Limited

F. Coburn, L. Wagner and D. Mertiri, Counsel, for the Responding Party, the Third Party and Proposed Defendant Canada Colors and Chemicals Limited

R. Cooper for the Defendant Canadian Pacific Railway Company (observing only)

J. Schatz for the Defendant Oxford Properties Group Inc. (observing only)

HEARD: May 11, 2022

REASONS FOR DECISION

1The plaintiff 863880 Ontario Limited (863) moves for an order granting leave to amend the amended statement of claim to add the third party Canada Colors and Chemicals Limited (CCCL) as a defendant.

2The defendants Canadian Pacific Railway Company (CPR) and Oxford Properties Group Inc. (Oxford) do not take a position or do not oppose.

3CCCL opposes the motion on the basis inter alia that 863’s claim as against CCCL is statute barred.

4From 1924 to 1971, CCCL leased from CPR a portion of a former industrial property and rail yard located on the north side of King Street West and east of Dufferin Street in the City of Toronto (the Parkdale Yard Lands). CCCL leased a portion of the Parkdale Yard Lands at the south end by King Street (the CCCL Lands). Over the years, portions of the Parkdale Yard Lands were also used by CPR and/or leased to industrial users other than CCCL.

5On January 28, 2004, 863 Ontario commenced the within action against CPR and Oxford by way of statement of claim. The statement of claim alleged environmental contamination on certain parcels of land that 863 Ontario purchased in stages between 1990 and 1998, located to the southeast of the Parkdale Yard Lands in what is now known as Liberty Village (the Liberty Village Lands).

6The statement of claim alleged that CPR and Oxford, which had sold certain of the lands to 863 in 1990, failed to disclose trichloroethylene (TCE) contamination or the presence of underground fuel storage tanks and underground drains under the surface of the Liberty Village Lands. The statement of claim asserted claims against CPR and Oxford in breach of contract, the principle in Rylands v. Fletcher, nuisance, negligence, negligent and fraudulent misrepresentation, trespass, and breach of statutory obligations.

7CCCL was not named as a party in the statement of claim and there were no allegations of a role by CCCL in the contamination of the Liberty Village Lands.

8CPR and Oxford delivered their statements of defence in 2004 and 2007, respectively. The parties served affidavits of documents in 2007 and 2008, and all parties were examined for discovery in October 2008.

9Pursuant to a consent timetable order dated December 22, 2009, the action was to be set down for trial by June 30, 2010. The action was not set down as ordered and on July 7, 2010, the registrar dismissed the action for delay.

10In August 2010, 863 brought a motion to set aside the registrar’s dismissal order and for leave to amend the statement of claim (the 2010 motion).

11At that time, Ewen Fisher, a Director of 863’s contractor, IBI Group, swore an affidavit in support of the 2010 motion. In his affidavit sworn August 27, 2010, Mr. Fisher set out the timeline for when he said 863 uncovered new material information that led it to seek the amendments to the statement of claim. In particular, Mr. Fisher gave evidence that:

(a) CPR’s representative had admitted during his examination for discovery in October 2008 to an underground sewer in the CPR railway corridor north of the Liberty Village Lands containing VOC-contaminated effluent (Fisher affidavit para. 30);

(b) 863 made a number of attempts to obtain further particulars of the sewer and VOC contamination, including conducting a number of searches of various municipal and environmental registries in or about early 2009, but they did not reveal further information (Fisher affidavit paras. 33-34); and

(c) 863 then turned its mind in 2009 to a 2006 Request for Proposal from the City of Toronto with respect to City-owned lands on which Lamport Stadium was situated (the Lamport Stadium RFP). Lamport Stadium is adjacent to the Liberty Village Lands to the west (Fisher affidavit paras. 35-36).

12The Lamport Stadium RFP disclosed at page 2 that “certain volatile organic chemicals which were handled at the CCCL plant that operated until 1970 on CPR lands north of Lamport Stadium may have migrated under King Street West and onto Lamport Stadium Lands.” The Lamport Stadium RFP also indicated that reports by consultants retained by CCCL and/or CPR existed that described the extent of the contamination, and that copies of these reports could be made available for review by contacting the City’s Forestry and Recreation Division.

13The IBI Group received the Lamport Stadium RFP in or about February 2006, but they did not submit a request for the consultant report at that time.

14In or about September 2009, 863 made a freedom of information request (the FOI Request) for disclosure of the reports referenced in the Lamport Stadium RFP. In or about January 2010, in response to that FOI Request, the Plaintiff received over 2,500 pages of technical documentation, including soil, geotechnical, and environmental reports.

15In his affidavit filed for the 2010 motion, Mr. Fisher deposed at para. 38 that these reports revealed to 863 that:

(a) Between 1924 and 1971, CCCL had been operating a chemical transferring facility on the Parkdale Yard Lands and, in the course of its operations, CCCL transferred, packaged and otherwise handled certain chemicals, including paints, resins and solvents, all containing chlorinated VOCs, in the normal course of its business operations.

(b) In the course of its operations, CCCL discharged chlorinated VOCs, including, but not limited to TCE and its by-products, onto and around the Parkdale Yard Lands.

(c) CPR terminated CCCL’s tenancy in 1971 with a view to eventually prepare the Parkdale Yard Lands for redevelopment.

(d) The VOCs discharged by CCCL had seeped into the groundwater in and around the Parkdale Yard Lands, and that the VOC-contaminated effluent had been migrating from the Parkdale Yard Lands in a south-easterly direction into adjacent and abutting lands and other lands in the vicinity, by three primary means:

(i) the natural south-easterly migration of VOC-contaminated effluent through the ground toward Lake Ontario;

(ii) the flow of VOC-contaminated effluent through an artificial network of existing pipes, conduits, utilities and related porous pipe bedding materials that intersect the contaminated groundwater plume (the Preferred Pathways); these Preferred Pathways provided a shortcut to intercept and funnel the contaminated groundwater directly in a south-easterly direction toward Lake Ontario, while contaminating soils along these routes; and,

(iii) the south-easterly flow of VOC vapours through the soil and the Preferred Pathways.

(e) Since as early as 1991, CPR and CCL had been conducting environmental investigations on the CCCL Lands, and that:

(i) the investigations identified the source of the VOC contamination on the CCCL Lands;

(ii) the investigations revealed that the VOC-contaminated effluent had been migrating in a south-easterly direction;

(iii) CPR and CCCL performed numerous assessments of the environmental contamination and of the required remediation strategies;

(iv) CPR and CCCL implemented an onsite treatment facility (hereinbefore referred to as the MPVE System), which had interruptions in its operations that caused that system to be shut down from September 2004 to September 2006 and from May 2008 to September 2008;

(v) the MPVE System did not halt the outward migration of VOC contamination from the CCCL Lands, and, in fact, the operation of the system appears to have caused increases in VOC levels; and

(vi) CPR and CCCL failed or refused to implement a thorough remediation system, as recommended by experts and that, as a consequence, the onsite treatment facility implemented by CPR and CCCL was an insufficient remedy for the significant contamination problem on, and emanating from, the CCCL Lands.

16In or about March 2010, in an effort to obtain further information about the contamination of the CCCL Lands, 863 conducted a search of the Toronto court registry, which revealed an action by the City of Toronto against both CCCL and CPR commenced on June 14, 2005. The court file was requisitioned in March 2010. 863 obtained access to the court file in June 2010, including a copy of the City’s statement of claim. The statement of claim alleged that the Parkdale Yard Lands were contaminated with VOCs, including TCE, over the course of CCCL’s operations on the leased portion of the Parkdale Yard Lands. The VOC contamination was alleged to have migrated onto City lands, including the Lamport Stadium lands to the south.

17Mr. Fisher gave evidence on the 2010 motion that it was this discovery of information in January and March 2010, about the nature of CCCL’s operations, CCCL’s alleged discharge of VOCs including TCE and its by-products onto the Parkdale Yard Lands, and the alleged migration of that VOC contamination in a southeasterly direction (towards the Liberty Village Lands) that required 863 to seek significant amendments to the statement of claim. The proposed amended statement of claim added significant allegations relating to CCCL. However, 863 did not seek to add CCCL as a defendant.

18As part of the 2010 motion, 863 sought leave to substantially amend the statement of claim to add allegations relating to CCCL and the Parkdale Yard Lands. 863’s proposed amended statement of claim added more than 30 paragraphs relating to the activities of CCCL and/or contamination of the CCCL Lands. In particular, the proposed amended statement of claim added the following allegations regarding CCCL/the CCCL Lands:

(a) In 1971, CPR ended the tenancy of its industrial tenant CCCL, which had been operating a chemical transferring facility on a portion of the Parkdale Yard Lands since 1924 (amended statement of claim paras. 27 and 58);

(b) In 2010 863 discovered critical material information concerning the ongoing flow of contaminants toward the Liberty Village Lands from a source located on a parcel of the Parkdale Yard, specifically the CCCL Lands (amended statement of claim para. 57);

(c) During its tenancy, CCCL had operated a chemical transferring facility on the CCCL Lands where it transferred, packaged and otherwise handled certain chemicals, including paints, resins and solvents. As a result of these operations, chlorinated VOCs including TCE and its by-products, were discharged by CCCL onto or around the CCCL Lands (amended statement of claim para. 59);

(d) The City of Toronto 2006 RFP indicated that reports by CCCL and CPR consultants documented VOC contamination at the CCCL plant which may have migrated under King Street West and onto the Lamport Stadium Lands (amended statement of claim para. 62);

(e) The FOI documentation included a number of reports commissioned by CPR and CCCL dealing extensively with VOC contamination at the CCCL lands and its migration in a south-easterly direction onto the neighbouring lands (amended statement of claim para. 65);

(f) The reports further revealed that the migration of the VOC contaminants, including TCE and its by-products, to adjacent land or neighbouring lands by means of a natural flow of contaminated effluent through the soil and migration of contaminated effluent and VOC vapours through the network of sewers, conduits, utilities and related porous bedding materials. This south-easterly flow contaminated the soil and groundwater downstream from the CCCL lands (amended statement of claim para. 66); and

(g) The south-easterly migration of toxic contaminants from the CCCL Lands directly flowed into the Liberty Village Lands and the CPR/Marathon (the predecessor to Oxford) lands that 863 purchased in 1990 (amended statement of claim para. 67).

19The proposed amendments to the statement of claim also contained details of the City of Toronto’s lawsuit against CCCL and CPR, allegations that contamination from the CCCL Lands was migrating onto the Liberty Village Lands and allegations of 863’s actions to curb the migrating contamination from the effluent allegedly emanating from the CCCL Lands (amended statement of claim paras. 68, 69, 71-73, 84,85).

20Despite these allegations related to CCCL’s operations, VOC contamination of the CCCL Lands, and migration of that contamination from the CCCL Lands to the Liberty Village Lands, 863 did not seek to add CCCL as a defendant in the 2010 motion.

21Based on correspondence between counsel in advance of the 2010 motion, 863 made a deliberate decision not to add CCCL as a defendant at that time. 863’s counsel at the time, who is not current counsel, responded to a letter from CPR’s counsel on July 13, 2010, as follows:

Finally, with respect to the issue of adding another party to the claim, it is our position that this is a matter for the Defendants to address. The Plaintiff seeks recovery from the Defendants as the parties that sold the lands in issue. We disagree that we are seeking to add another party to the action. The proposed amendments have been introduced for the purpose of supplementing the claim with the new material information recently obtained by our client and for no other reason.

22The 2010 motion was heard in 2011. On March 13, 2012, Master Hawkins set aside the administrative dismissal and granted 863 leave to amend the statement of claim. On January 15, 2013, the statement of claim was amended pursuant to the leave granted by Master Hawkins.

23On April 25, 2013, and May 3, 2013, respectively, Oxford and CPR issued third party claims against CCCL. Each of Oxford and CPR allege that to the extent they are found liable to 863 for any contamination of the Liberty Village Lands, CCCL is responsible for such damages. On September 18, 2013, CCCL served its defences to the third party claims and to the main action. 863 did not then seek to add CCCL as a defendant.

24On or about November 20, 2018, 863 retained new counsel, their current counsel.

25In or about September 2019, 863 retained Dr. Julie Konzuk of Geosyntec Consultants International Inc. to provide an opinion on the source or sources of contaminants that migrated onto the Liberty Village Lands.

26In her report dated January 30, 2021, Dr. Konzuk opines that 99% of the VOC contamination on the Liberty Village Lands is attributable to contamination that migrated from the CCCL Lands.

27It is as a result of the findings of Dr. Konzuk that 863 now seeks to add CCCL as a defendant. 863 argues that it had no actual knowledge until 863 acquired the report on January 30, 2021, that the former operations of CCCL on the CCCL Lands had indeed contributed to the contamination on the Liberty Village Lands. 863 argues that the limitation period is live issue. 863 argues that the evidence does not clearly indicate that 863 did not undertake due diligence in investigating its claim against CCCL and that leave to amend should be granted without prejudice to plead a limitation period defence.

28On a motion to amend a pleading where is a defendant is sought to be added, the applicable Rules of Civil Procedure are Rules 26.01, 5.03 and 5.04.

29Rule 26.01 states:

26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

30Rule 5.03(4) states:

5.03(4) The court may order that any person who ought to have been joined as a party or whose presence as a party is necessary to enable the court to adjudicate effectively and completely on the issues in the proceeding shall be added as a party.

31Rule 5.04(2) states:

5.04(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

32Where a limitation period has expired, however, section 21 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (the Act) prohibits the addition of a party to a proceeding:

Adding party

21(1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.

33The language of section 21(1) of the Act is mandatory, not discretionary. If the limitation period has expired, a party shall not be added.

34The “…effect of s. 21(1) is that “the clear expiration of a limitation period is an absolute bar to the addition of a party to an already existing action” (Morrison v. Barzo, 2018 ONCA 979, at para. 27, citing Arcari v. Dawson, 2016 ONCA 715 at para. 7, leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 522). This prohibition applies whether or not there is prejudice to the proposed party (Morrison at para. 22).

35863 bears the burden of demonstrating that it neither knew nor ought to have known that it had a claim against CCCL until a point in time not less than 2 years before the motion was brought (1365 California Ltd. v. Moss Property Management Inc., 2019 ONSC 5620 (Ont. S.C.J. at para. 17). In this case that would be before June 21, 2019.

36In my view, 863 has not met its burden. Based on the above-referenced evidence put forward by 863’s affiant in support of the 2010 motion, I am satisfied that 863 had actual knowledge of its claims against CCCL at the time it brought its motion to amend the statement of claim in 2010.

37As recently stated by Justice Moldaver in Grant Thornton LLP v. New Brunswick, 2021 SCC 31 at para. 42: “a claim is discovered when a plaintiff has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn.” This “plausible inference of liability” standard requires more than mere suspicion or speculation, but also makes it clear that certainty is not required (Grant Thornton at para. 46, see also Gordon Dunk Farms Limited v. HFH Inc., 2021 ONCA 681 at paras. 30, 31).

38Mr. Fisher gave evidence in his sworn affidavit in August 2010 that as of January 2010, 863 had copies of soil, geotechnical, and environmental reports commissioned by CPR and CCCL with respect to the CCCL Lands. Mr. Fisher stated that these reports “revealed” to 863 that CCCL had discharged chlorinated VOCs, including TCE and its by-products, in the course of its operations on the CCCL Lands and that these VOCs had been migrating in a south-easterly direction (i.e., towards the Liberty Village Lands). Mr. Fisher further gave evidence that this newly “uncovered” information gave the plaintiff a “…substantial reason to believe that a principal source of the environmental contamination to the Liberty Village Lands, is the CCCL Lands owned by CPR” (Fisher affidavit at para. 40). I am satisfied that the material facts set out in the Fisher affidavit were sufficient to give rise to actual knowledge of a claim against CCCL (Albert Bloom Limited v. London Transit Commission, 2021 ONCA 74 at paras. 30, 32).

39863’s position is that it did not have actual knowledge that the former operations of CCCL on the CCCL Lands had contributed to the contamination on the Liberty Village Lands until it received the Geosyntec Report on January 30, 2021. 863 also relies on Dr. Konzuk’s evidence on cross-examination that a more recent soil excavation in 2019 provided critical information regarding the source and extent of the VOC contamination on the Liberty Village Lands (transcript of the cross-examination of Dr. Konzuk at pages 46-49).

40It was not necessary for 863 to have its own expert opining that the CCCL Lands are the source of contamination nor the relative contribution to the overall contamination to discover it had a claim (Andrews v. Pattison, 2022 ONCA 267 at paras. 6-9, Kowal v. Shyiak, 2012 ONCA 512 at para. 19). As of January 2010, 863’s evidence was that it had numerous reports giving it “substantial reason” to believe that the CCCL Lands were a “principal source” of the contamination (Fisher affidavit para. 40). This satisfies the plausible inference test.

41As stated by Justice Mitchell in the motion decision in Albert Bloom Limited v. London Transit Commission, 2021 ONSC 6674 (Ont. S.C.J.) at para 54; appeal dismissed at 2021 ONCA 74:

54Whether a claim has been discovered is not a question of whether a plaintiff has acquired sufficient evidence to ensure that the case will be successful at trial. That is, a plaintiff does not require evidence sufficient to prove its case at trial, only that it has sufficient evidence to establish that a cause of action exists. As the Court of Appeal held in Lawless v. Anderson, [2011 ONCA 102, at para.36] such an approach:

…confuses the issue of when a claim is discovered with the process of assembling the necessary evidentiary support to make the claim “winnable”. To discover a claim, the plaintiff need only have in her possession sufficient facts upon which she could allege negligence. Additional information will support the claim and help to assess the risk of proceeding but is not needed to discover the claim.

42It was not necessary for the plaintiff to know that CCCL was responsible for the contamination of the Liberty Village Lands nor was it necessary to know which of CPR, Oxford and CCCL was responsible. It was sufficient to start the limitations clock that the plaintiff identifies CCCL as a potential tortfeasor and a possible contributing source of the contaminant. In my view this occurred in 2010.

43For these reasons, 863’s claim against the proposed defendant CCCL is statute barred. The motion is dismissed.

44If successful on the motion, 863 sought costs on a partial indemnity basis in the all-inclusive amount of $15,675.12. If successful on the motion, CCCL sought costs on a partial indemnity basis in the all-inclusive amount of $73,888.64. CCCL was successful and is entitled to costs.

45Four lawyers and three non-lawyers worked a total of approximately 248 hours on this motion. In responding to this motion, CCCL obtained and reviewed the material from the 2010 motion. 863’s potential claim directly against CCCL at issue on this motion was significant. However, in my view the amount sought is high. Having regard to all of the circumstances of this motion, a fair and reasonable amount that 863 could expect to pay for costs is the all-inclusive sum of $50,000.00, payable within 30 days.

46Order to go as follows:

1. The motion is dismissed.

2. Costs of the motion are fixed on a partial indemnity basis in the all-inclusive amount of $50,000.00, payable by 863 to CCCL within 30 days.

Associate Justice B. McAfee