Ontario Court Of Appeal Provides Guidance On Landlord Liability For Historical Contamination

On November 6, 2017, the Court of Appeal issued its decision in Sorbam Investments Ltd v Litwack, 2017 ONCA 850, dismissing the plaintiff's appeal of Justice Elizabeth C. Sheard's decision in the Superior Court of Justice granting summary judgment to the defendants, 2017 ONSC 706.1 The case revisits the issue of landlord liability for historical contamination caused by its tenant and provides guidance as to when a landlord may be held liable for its tenant's acts and omissions in operating a dry-cleaning business or other business known to use hazardous solvents.

Background

This case arose from the plaintiff's discovery in 2010 that the groundwater on its property (the “plaintiff property”) was contaminated with tetrachloroethylene (also known as PCE or PERC) believed to have originated from the abutting neighbouring property. The neighbouring property (referred to as the “Litwack lands”) is also contaminated with PCE.

The PCE contamination on the Litwack lands was discovered in September 2006 during the course of investigations as part of the sale of the lands to the current owner from the Litwack defendants. The Litwack defendants2 had owned the property from 1970 to 2007 and had leased the lands to commercial tenants. There is some evidence that the Litwack defendants leased the property to a tenant who operated a dry-cleaning business in the early to mid-1990's, which the plaintiff alleges is the source of the PCE contamination.

According to the Litwack defendants, they did not know that the dry-cleaning tenant was emitting contaminants during its tenancy and had no reason to inquire or investigate the tenant because they never noticed any actual spills or contamination by the tenant nor the tenant bringing chemicals onto the property or using them in its operations. In other words, the Litwack defendants had no reason to believe that the Litwack lands were contaminated by their dry-cleaning tenant or that the lands were the source of the plaintiff property contamination prior to their investigations in 2006. In addition, the Litwack defendants' consultant in conducting these investigations concluded that the source of the contamination could not be identified, may in fact have been coming from the plaintiff property and that no remediation work was required, given that there was no ongoing commercial operation that could be identified or the source of the pollution, though annual monitoring was recommended.

The plaintiff commenced a claim against the Litwack defendants and the current owner of the Litwack lands. The dry-cleaner was not a party to the action, likely because it no longer carries on business and its principal no longer lives in Canada. The Litwack defendants brought a motion for summary judgment asking the Court to dismiss the plaintiff's claim in its entirety.

Summary Judgment Motion

The motion judge held that she only needed to decide whether the Litwack defendants knew the activities of the tenant could or did contaminate the plaintiff property in order to dispose of the motion. This...