The Rural Voice, 2003-02, Page 41Agrilaw
Post -purchase contamination - who pats?
Paul G.
Vogel, a
partner in the
London law
firm of
Cohen
Highley LLP.
By Paul Vogel
A vendor of contaminated lands
may incur liability to a purchaser for
remediation costs incurred where the
contamination is not discovered by
the purchaser until after the closing
of the transaction. What is the
vendor's obligation to disclose to the
purchaser previous contamination of
which he may be aware and how can
the vendor protect himself from
incurring future liability for
remediation costs?
The Ontario Superior Court
recently considered a claim by the
purchaser of a former car dealership
property for costs of remediating
subsurface soil contamination which
resulted from leaking underground
gasoline storage tanks removed by
the vendor prior to the sale. At the
time of acquisition of the property by
the vendor from the car dealership,
he had obtained from the car
dealership an environmental audit
report indicating that the property
was not contaminated. In addition,
upon his removal of the underground
storage tanks, the vendor had
obtained a further report also stating
that the property was not
contaminated.
On the basis of these reports, the
vendor had represented to the
purchaser that "to the best of my
knowledge and belief the property
does not contain any contaminants".
However, in the Agreement of
Purchase and Sale, the vendor had
refused the warranty requested by the
purchaser affirming the property as
pollution or contaminant free and
specifically provided that "the
property is purchased 'as is' `where
is'."
Following purchase of the
property, in connection with a
proposed refinancing, the purchaser's
bank required a more comprehensive
environmental evaluation of the
property. In completing this
environmental evaluation, the
purchaser discovered that significant
subsurface gasoline contamination
remained on site which exceeded
current Ministry of Environment
cleanup criteria. The purchaser was
required to undertake remediation of
the property at a total cost of
approximately $67,000. The
purchaser sued the vendor to recover
these costs.
In rejecting the purchaser's claim,
the court held that the provision of
the two reports by the vendor to the
purchaser satisfied the vendor's
obligation to disclose to the
purchaser the extent of his
knowledge concerning the
environmental condition of the
property. The court stated:
"It is significant that...both
reports were provided to the
purchaser and he was in
possession of them before any
offer was made.
There is no evidence that (the
vendor) was the author of any of
the pollution or that he was the de
facto owner of any of the
pollution, nor is there any
evidence that he knew of any
pollution.
It is obvious that relying on the
two previous reports, he was of
the opinion that the site was clean.
There is nothing significant in that
opinion as basically that was the
same opinion formulated by (the
purchaser) on the basis of the
reports."
With respect to the purchaser's
assertion that the vendor had an
obligation to disclose to the
purchaser the latent defect within the
property and to repair this defect, the
court held:
"In my view, if there was a defect
in the property it was not latent
but rather patent. It could have
been discovered by due
diligence....
All information was provided
prior to closing and the plaintiff
even took possession in advance
of the closing date. The plaintiff
cannot rely on their own lack of
diligence to fix responsibility
upon the defendant.
The request made by the (bank) is
indicative of the effort made by
corporations in attempting to
ascertain the real state of
properties with this type of
history. If the cost of an initial
environmental assessment was
$2,000, it would have been, in the
circumstances, money well spent."
For their own protection, vendors
should be cautious when representing
the environmental condition of their
property and should specify in the
Agreement of Purchase and Sale the
limitation on their representations.
Purchasers, on the other hand, are
well advised not only to obtain from
the vendor existing reports
concerning the environmental
condition of the property but to
undertake all reasonable additional
investigation to satisfy themselves in
this regard.0
Agrilaw is a syndicated column
produced by the full service London
law firm of Cohen Highley LLP. Paul
G. Vogel, a partner in the firm,
practices in the area of commercial
litigation and environmental law.
Agrilaw is intended to provide
information to farm operators on
topics of interest and importance.
The opinions expressed are not
intended as legal advice. Before
acting on any information contained
in this column, readers should obtain
legal advice with respect to their
own particular circumstances and
geographical area.
FEBRUARY 2003 37