The Deal That Didn't Tank: Walton v Warren

By Donna Shier, Partner and Certified Environmental Law Specialist by the Law Society of Ontario, with the assistance of Riley Weyman, Student-at-Law. © Willms & Shier Environmental Lawyers LLP.

March 2, 2020

On January 9, 2020, the BC Supreme Court released its decision in Walton v Warren.1 Walton is about the survival of environmental obligations after the closing of a real estate transaction and emphasizes that the wording in contracts for purchases and sales is critical.

Facts

The Defendants sold a residential property in Victoria, British Columbia to the Plaintiffs. After being warned by their realtor that many older homes in Victoria have buried fuel oil tanks, the Plaintiffs included an oil tank addendum (the "Addendum") in the agreement of purchase and sale. 2 The Addendum required the Defendants to remove any underground storage tank located on the property and remediate the surrounding soil before closing. 3

More than two and a half years after the transaction closed, the Plaintiffs found an underground fuel oil storage tank on the property. The Plaintiffs successfully sued the Defendants for the costs the Plaintiffs incurred to remove the tank and impacted soil. 4

Judgment

The Judge focused her reasoning on the interpretation of the Addendum saying:

In, my view, the wording of the Addendum is not ambiguous. It obliges the defendants to remove "any" oil tank on the Property and to remediate prior to the Completion Date. As an oil tank was discovered some years after the Completion Date, the defendants had not complied with the terms of the Addendum on the Completion Date. They were in breach of the Addendum. 5

Focusing on the wording of the Addendum, the judge spent no time addressing the doctrine of merger, and little time on the survival clause.

Merger

Pursuant to the doctrine of merger, on completion of a contract for the sale of land, the conditions of the contract and the parties' rights under the contract often merge into the deed of conveyance. 6 If that is the case, after closing the parties can only look to the deed of conveyance for a remedy and can no longer rely on the conditions of the contract. 7

Whether the doctrine of merger applies to specific conditions of a contract of purchase and sale depends on the intention of the parties. 8 Without an intention for merger, a condition can survive closing. 9

Survival

In reference to the survival of the Addendum, the Judge said:

There is no evidence in this case that the...