The Polluter Does Not Always Pay: Environmental Liability Of Property Owners

• Law Firm: McMillan LLP
• Subject Matter: Environment, Real Estate and Construction, Environmental Law, Real Estate, Landlord & Tenant - Leases
• Author: Ms Talia Gordner, Ralph Cuervo-Lorens and Kiira Kaarid (Summer Student)
• Published date: 02 May 2023

Environmental contamination is a multi-faceted and complex issue with different bases of liability, particularly against the landowner. Leaving aside regulatory liability,¹ civil claims against landowners for remediation or compensation arising from environmental damage may be brought by tenants, neighbours or future owners. Multiple legal bases are available to recover such losses, including negligence, nuisance, trespass, strict liability,² and under the Ontario Environmental Protection Act.³ Due to the fact-dependent nature of these claims and the limited case law available as guidance, these situations can be especially difficult to navigate while the cost consequences can be significant.

In this Bulletin, we explore the three primary situations in which a landowner can be held civilly liable for contamination on or sourced in its property: (1) where the landowner is the occupier of the property; (2) where the landowner has purchased polluted property; and (3) where a tenant caused contamination of the property. We then discuss strategies and best practices for landowners to reduce their environmental risk.

Scenario 1: Landowner-Occupier is the Polluter

Where landowners who are also the occupiers of the land cause or are responsible for the contamination at their property, they are obligated to take proactive and mitigative steps to prevent the contamination from causing an adverse effect to the environment (e.g., entering watercourses, impacting drinking water wells, entering into the building on site through indoor air, etc.) or migrating off-site to abutting or downstream lands.⁴

Where such contamination has migrated off-site, the landowner will be exposed to the broadest range of liability. In these circumstances, the landowner can be required to pay significant damages, including for the costs of remediating the neighbouring properties to their pre-contamination condition, preventing or mitigating the continuing migration of contaminants off-site (which often includes remediation of the source property), the loss in value of the impacted parties' properties/assets, as well as the legal costs of the impacted party bringing the lawsuit against the landowner. Given the complexity and limitations of environmental remediation strategies and technologies, the level of public awareness with respect to the protection of the environment, and the potential long-term harm caused by polluting events, damages awarded in these cases can quickly reach several millions of dollars.⁵

In Canadian Tire v. Huron Concrete ("Canadian Tire"),⁶ Huron Concrete operated a private fuel outlet on its property and failed to adequately test and monitor the underground gasoline storage tanks for potential leaks or spills (as required by provincial regulations). Consequently, the stored gasoline leaked into the property and migrated onto neighbouring lands. Huron Concrete was ordered to pay its impacted neighbour just over $4.8 million in damages plus legal costs.⁷

Similarly, in Midwest Properties Ltd. v. Thordarson ("Midwest"),⁸ the defendant company improperly stored petroleum hydrocarbons on its property for nearly 40 years without appropriate approvals and in excess of permitted amounts. It also ignored various orders issued against it by the Ministry...