Lakeview Village Professional Centre Corporation v Suncor Energy Inc, 2016 ABQB 288

Court of Queen ’ s Bench of Alberta Citation: Lakeview Village Professional Centre Corporation v Suncor Energy Inc, 2016 ABQB 288 Date: 20160519 Docket: 1401 14011 Registry: Calgary Between: Lakeview Village Professional Centre Corporation Plaintiff - and - Suncor Energy Inc and Commonwealth Business Management Ltd Defendants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.L. Martin _______________________________________________________ 1. Introduction [ 1 ] The Plaintiff purchased lands in the Lakeview subdivision of Calgary in 1998.

The lands consist of commercial buildings known as the Lakeview Professional Centre, as well as two parking lots and a surrounding landscaped area. At the time of purchase, the Plaintiff was aware that a gas station was formerly on the site. This raised concerns of potential contamination of the lands; however, an

initial environmental assessment found no significant contamination. [ 2 ] A number of years later, in 2013, the Plaintiff received an offer to purchase the lands, prompting another environmental assessment. This assessment found contamination at a level that required remediation of the lands, including the removal of piping, concrete and soil.

The Plaintiff has spent approximately $400,000 on remediation to date, with further costs expected. [ 3 ] The Plaintiff wishes to recoup some or all of these costs from former owners of the lands, including the successor of the gas station operator and the vendor of the lands who commissioned the first environmental assessment. Normally, the Plaintiff’s action would be out of time under the Limitations Act , as these events occurred well past the 10-year ultimate limitation period.

In order to overcome this, the Plaintiff wishes to rely on a provision in the Environmental Protection and Enhancement Act that permits a judge to extend the limitation period in some cases. [ 4 ] I must determine the procedure that applies to applications of this type, and then determine whether to grant an extension in this case. 2. What is the Procedure for Applications under s 218 of the Environmental Protection and Enhancement Act? [ 5 ]

Section 218 of the Environmental Protection and Enhancement Act , RSA 2000, c E-12 (“ EPEA ”) permits a judge to extend a limitation period where the basis for the proceeding is that the release of a substance into the environment resulted in an adverse effect.

The Act defines adverse effect to mean “impairment of or damage to the environment, human health or safety or property”, EPEA , s 1(b). [ 6 ] In exercising the discretion under s 218, a judge must consider a number of factors, where information is available, including: when the adverse effect occurred; whether the adverse effect ought to have been discovered by the claimant through the exercise of due diligence; whether the defendant will be prejudiced from maintaining a defence to the claim on the merits; and any other relevant criteria. 218

(1) A judge of the Court of Queen's Bench may, on application, extend a limitation period provided by a law in force in Alberta for the commencement of a civil proceeding where the basis for the proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment.

(2) An application under subsection (1) may be made before or after the expiry of the limitation period.

(3) In considering an application under subsection (1), the judge shall consider the following factors, where information is available: (

a) when the alleged adverse effect occurred; (

b) whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due dili-gence; (

c) whether extending the limitation period would prejudice the proposed defendant's ability to maintain a defence to the claim on the merits; (

d) any other criteria the court considers to be relevant. [ 7 ] The purpose of

section 218 is to extend the period in which civil proceedings can be initiated for damages to the environment, recognizing that harmful effects of contamination may not be evident for several years: Alberta, Legislative Assembly, Hansard , 24th Leg, 2nd Sess, (April 6, 1998) at 1385. The factors under s 218 ensure that the system for extending limitation periods is not “open to abuse”: Alberta, Legislative Assembly, Hansard , 24th Leg, 2nd Sess, (April 6, 1998) at 1385: ... This addition extends the period during which the civil proceedings can be initiated for damages to the environment.

We think this is sensible for some harmful effects may not be evident for several years. We’re seeing that occur on occasion. The amendment sets out the conditions that the judge must consider when deciding whether to extend the limitation period, so the system should not be open to abuse. [ 8 ] It is understandable that the Plaintiff is applying under s 218 for an extension of the limitation period.

The Plaintiff wants to know whether to spend its resources pursing this action, while knowing a limitation period could be fatal to its claim. [ 9 ] A preliminary issue is the procedure that governs applications under s 218. Do I decide conclusively on this application that the limitation period is extended, or not extended? Or, can I make a preliminary determination giving the Plaintiff the green light to go ahead to trial, where the limitation argument may surface again? [ 10 ] This type of application is fairly novel in Alberta.

There is little case law to date considering s 218, though counsel brought my attention to two cases: Wainwright Equipment Rentals Ltd. v Imperial Oil Ltd. , 2003 ABQB 898 , 343 A.R. 191 (“ Wainwright ”) and Jager Industries Inc. v Canadian Occidental Petroleum Ltd. , 2001 ABQB 182 , 294 AR 355 (“ Jager ”). In Wainwright , the Court found there was sufficient evidence to warrant an extension of the limitation period. In Jager , the Court found there was insufficient evidence to make a decision at that time.

The Court dismissed the application, noting that the plaintiff could apply again pre-trial with the necessary evidence, or argue the issue at trial. This suggests that in cases where there is insufficient evidence the plaintiff has the option of applying at a later time. [ 11 ] There is also little guidance on this issue from outside of Alberta. A review of legislation from other provinces reveals that Alberta’s approach to extending the limitation period for environmental claims is unique. There are provisions extending limitation

periods for environmental claims in provinces like Ontario and Saskatchewan; however, the provisions do not provide the court with discretionary factors to guide the decision. For example, see s 17 of Ontario’s Limitations Act , 2002 RSO 2002, c. 24 , Sch. B, which states: “There is no limitation period in respect of an environmental claim that has not been discovered”.

Nor does case law from those jurisdictions speak to the procedural considerations at play in these types of applications. [ 12 ] Therefore, to answer the procedural question in this case, I have considered the nature of the application and the type of evidence that the s 218 factors will solicit, as well as Wainwright and Jager . [ 13 ] In some cases, the plaintiff will present sufficient evidence to satisfy a court to extend the limitation period at a preliminary stage on a balance of probabilities, as in Wainwright . This is somewhat similar to the approach for

summary judgment applications, where the court examines the record to determine if a disposition that is fair and just to both parties can be made on the existing record: see Hryniak v. Maudlin , 2014 SCC 7 , [2014] 1 S.C.R. 87, at para 49 , and Windsor v Canadian Pacific Railway Ltd , 2014 ABCA 108 , 94 Alta. L.R. (5th) 301, at para 13 . [ 14 ] In other cases, the evidence may be underdeveloped. This occurred in Jager at para 16 , where there was no evidence on when the adverse effect occurred.

The Court also found that questions about a reasonable landowner’s knowledge of adverse effects would be in the domain of expert opinion, which was not yet available. [ 15 ] Another important consideration in these applications is whether a s 218 finding will prematurely determine an issue at trial. In some cases, findings under 218 will be intertwined with merit-based considerations. For example, if the court clearly determines a party exercised due diligence in ascertaining an adverse effect, that determination may influence findings on the degree of liability for contamination.

This is because due diligence is a consideration when determining liability under s 129 of the Act . Determining the issue could be problematic if new facts emerge at trial that affect the due diligence analysis. [ 16 ] This prematurity consideration arises in other contexts as well, such as when courts defer determining the merits of a limitations defence during an application to amend.

In Kydd v Abolarin , 2011 ABQB 690 , 520 A.R. 250, the Court stated at para 42 that “[n]umerous cases have emphasized that it is not desirable to determine the merits of a limitations defence in the context of an application to amend, and where the matter is not clear and additional facts relevant to the issue may be adduced at trial, an amendment should be allowed and the limitations issue determined at trial”.

As a result, in applications to amend where a limitations issue is present, and the evidence is unclear or underdeveloped, the court may allow the action to proceed on a preliminary basis, and have the merits of the limitations issue determined at trial. This approach was described by Wittmann C.J. in Dow Chemical Canada Inc. v. Nova Chemicals Corp. , 2010 ABQB 524 , 35 Alta. L.R. (5th) 51, with options 1 and 3 being relevant for our purposes, at para 64: Traditionally, when there is an issue of limitations and an amendment is sought, a court may: 1.

Determine the limitation period has not expired and allow the amendment. 2. Rule the limitation period has expired and therefore consider s.6 of the Limitations Act which provides for when an amendment can be made beyond the limitation period. 3. Find that because of uncertainty in the evidence, the amendments should be allowed subject to the determination of the limitation issue at trial: Hill v. Hill , [2007] A.J.

No. 1515 (Q.B.) at para. 22 , aff'd 2007 ABCA 293 at para. 10 . [ 17 ] I believe it is helpful to adopt a modified version of this approach for s 218 applications. [ 18 ] Option 3 allows amendments subject to the determination of the limitations issue at trial. This option is equivalent to giving the plaintiff a green light to go ahead to trial. In my opinion, to justify moving ahead to trial under s 218, the plaintiff must meet a certain threshold on the s 218 factors. I believe the proper threshold is for the plaintiff to show a good arguable case.

This requires the plaintiff to show that after consideration of the s 218 factors, their argument for an extension is grounded on some evidence and it is not fanciful: Scott & Associates Engineering Ltd. v. Ghost Pine Windfarm , 2011 ABQB 630 , 520 A.R. 190, at para 34 . [ 19 ] In this vein, I propose the following two-step approach to use for s 218 applications: 1 . Is there sufficient evidence on the s 218 factors to grant an extension of the limitation period? 2 .

If there is not enough evidence to make that determination, or if there is sufficient evidence but an issue for trial could be determined prematurely, has the claimant shown a good arguable case for an extension? If so, the claimant is entitled to an extension of the limitation period subject to a final determination of the issue at trial. [ 20 ] This approach respects the purpose of s 218 while acknowledging the legitimate interest of a claimant to know whether to spend further resources on their claim.

It also allows the court to extend the limitation period for obviously meritorious s 218 cases or to weed out cases that are attempting to “abuse the system”. 3. Should the Limitation Period be Extended in this Case? [ 21 ] I now turn to the substance of the application. [ 22 ] The Plaintiff, Lakeview Village Professional Centre Corporation (“Lakeview”), seeks an extension under s 218 of EPEA to the limitation period that would otherwise apply under the Limitations Act .

Lakeview commenced an action in 2015 against Suncor Energy Inc. (“Suncor”) and Commonwealth Business Management Ltd (“Commonwealth”) relating to the contamination and remediation of the lands it now owns. [ 23 ] Some background will be helpful at this point:

[ 24 ] Gulf Oil (now Suncor) was the owner of the lands from 1969 to the mid-1980’s. It operated a retail gas station that was used for the storage, sale and dispensing of petroleum products. At some point in the mid-1980’s, Gulf closed the gas station. [ 25 ] In May 1988, Commonwealth purchased the lands. [ 26 ] Ten years later, in 1998, Lakeview’s predecessor (who I will refer to as Lakeview) offered to purchase the lands from Commonwealth. By this time, the gas station was gone and the underground storage tanks had been removed.

The site consisted of commercial buildings now known as the Lakeview Professional Centre, two parking lots and the surrounding landscaped area. [ 27 ] When it made the offer, Lakeview knew the lands had previously housed a gas station. As a condition of its offer, Lakeview asked Commonwealth to provide information regarding the environmental state of the lands. Commonwealth commissioned a Phase II Environmental Assessment Report from Thurber Environmental Consultants, and provided the report to Lakeview.

The Thurber Report found that soil samples and groundwater samples had concentrations of hydrocarbons compounds below detection limits or below Level 1 Criteria for highly sensitive sites. The Report concluded there was “no evidence of significant contamination on the subject property and no further investigation is warranted at this time”. [ 28 ] Lakeview went ahead with the purchase and waived the condition in the offer that it was satisfied as to the environmental state of the property. [ 29 ] In 2013, Lakeview received an offer to purchase the lands from Majestic Realty.

Majestic commissioned Phase I and Phase II Environmental Assessments. The assessments found hydrocarbon contamination at a level that required remediation. Lakeview then commissioned a Phase III Environmental Assessment and began remediation of the lands, including the removal of contaminated soil and buried concrete and metal piping, followed by backfill of the site with clean soil.

To date Lakeview has spent over $400,000 in relation to the remediation and further steps and costs are likely. [ 30 ] Based on the information before me, it appears the contamination was missed in the Thurber Report because their testing was on the perimeter of the lands, not on the actual site of the underground storage tanks. [ 31 ] Lakeview alleges that Suncor’s petroleum operations were the source of the contamination on the lands. Suncor denies this allegation, and notes that a Husky gas station is adjacent to the lands and may be the cause of the contamination.

In terms of Commonwealth, Lakeview alleges it failed to properly investigate and remediate the contamination on the lands when it was owner. Lakeview asserts that because the infrastructure for the underground storage tanks was not removed prior to Commonwealth owning the lands, the contamination of groundwater and soil continued throughout Commonwealth’s ownership. Commonwealth’s position is that it did not cause or contribute to the contamination of the lands, and its only knowledge of the environmental state of the lands was the Thurber Report. [ 32 ] Suncor opposes the application.

Suncor argues that s 218 is an exceptional remedy because it provides a judge with the discretion to waive the 10-year ultimate limitation period. Suncor points out that Lakeview commenced its claim 27 years after the last possible date that Suncor had ownership of the lands.

In addition, Suncor does not accept responsibility for the contamination, noting that a Husky gas station operates in close proximity to the lands and has been there for many years. [ 33 ] Suncor’s main argument is that Lakeview did not exercise due diligence in discovering the alleged adverse effect, and that if it had, the adverse effect could have easily been discovered. Suncor argues that when Lakeview made an offer to purchase the land, it was aware a gas station had been on the lands and was rightly concerned about contamination.

However, rather than undertaking independent investigation of the environmental state of the lands, Lakeview relied on a report commissioned by Commonwealth, the vendor of the lands. Lakeview did not provide instructions for the environmental assessment and did not ensure appropriate testing was done on the actual site of the underground storage tanks.

Suncor contrasts this approach with the events that occurred in 2013, when the potential purchaser of the lands, Majestic, commissioned an environmental assessment on its own behalf and was able to discover the contamination. [ 34 ] Suncor points out that the purchase agreement made Lakeview responsible to satisfy itself as to the environmental state of the lands, and that it did nothing independently to do so, relying solely on the Thurber Report.

In addition, had Lakeview properly reviewed the Thurber Report, it would have known testing was on the perimeter of the property, rather than under the site of the former underground storage tanks, which should have raised concerns. Lakeview had no contact with Thurber and asked no questions about the Report. Suncor submits it was unreasonable for Lakeview to rely on the Report. In sum, Suncor submits Lakeview took no reasonable steps to discover the presence of the alleged adverse effect and lacked due diligence. [ 35 ] For its part, Commonwealth takes a different approach.

It argues the purpose of EPEA is to target parties who have polluted the environment and to make those parties responsible for clean up through the “polluter pay” principle.

Section 218 furthers this purpose by providing courts with the discretion to prevent polluters from relying on limitations law. Commonwealth argues that as it did not cause or contribute to the contamination of the lands, it is not the target of the s 218 exemption. [ 36 ] Commonwealth also takes issue with the basis for Lakeview’s action, which alleges Commonwealth owed a duty to Lakeview to discover and clean up contamination. Commonwealth argues there is no authority for this proposition.

Further, unlike the action against Suncor, there is no allegation that Commonwealth was involved in releasing a harmful substance into the environment, which is a requirement for s 218 to apply. [ 37 ] Finally, Commonwealth states that its only knowledge of the environmental state of the lands was contained in the Thurber Report, which it provided to Lakeview. Commonwealth states there is no evidence it commissioned the Report in a way that benefited its position as vendor. Analysis

[ 38 ] I now turn to an analysis of the s 218 factors, which include: when the adverse effect occurred; whether the adverse effect ought to have been discovered by the claimant through the exercise of due diligence; whether the defendant will be prejudiced from maintaining a defence to the claim on the merits; and any other relevant criteria. A. Alleged Adverse Effect [ 39 ] There is some information on when the alleged adverse effect occurred.

The Plaintiff’s contention - that the release occurred when the gas station was operational and perhaps later when some equipment, including piping, was left underground – is plausible. This would mean the time frame for contamination is from 1969 to the mid-1980’s at least, and potentially as late as 2013.

However, Suncor’s contention that the Husky gas station caused or contributed to the contamination at some point in time is also a possibility. [ 40 ] In any event, if the concern is that there is “no abuse of the system” when a claimant relies on s 218, I find that the time frame involved here is not so long ago that it would be unfair to allow the action to proceed against either party. I note that in Wainwright the Court extended a limitation period where the gas station operated between 1958 and 1965, and the action was not commenced until 2001. B.

Due Diligence [ 41 ] I find, on a preliminary basis only, that Lakeview exercised due diligence in ascertaining the presence of the alleged adverse effect. Before entering into the purchase of the lands, Lakeview was concerned about potential contamination from the gas station. Due to this concern, Lakeview required Commonwealth to provide information on the environmental status of the property as a condition of the purchase. Commonwealth commissioned the Thurber Report to satisfy that condition. The Report concluded there was no evidence of significant contamination and no further investigation warranted.

This eased Lakeview’s concerns and it went ahead with the purchase. The Report was done by professionals and there was no reason for Lakeview to question the Report or suspect it was being misled or tricked. [ 42 ] Other cases have found due diligence under similar circumstances. [ 43 ] In Wainwright , the claimant also knew it was purchasing property that was the site of a former gas station. The purchase agreement stipulated the underground storage tanks would be removed and backfilled.

Four years after the sale, a concern arose and the claimant contacted the former gas station operator to confirm the tanks had been removed. The operator confirmed it removed the storage tanks. 24 years later, the claimant wanted to sell the land and agreed to an environmental assessment. The assessment found three underground storage tanks and contamination of the property.

The claimant then commenced an action against the gas station operator. [ 44 ] The Court found the claimant exercised due diligence in asking for, and relying on, the representations of the operator, at para 11: When confronted in 1989 about the possibility of underground storage tanks, Wainwright Equipment exercised due diligence in contacting Imperial Oil to confirm whether or not they had in fact removed the underground storage tanks from the property.

The result of this inquiry was a cover letter from Imperial Oil dated March 27, 1989 confirming that the storage tanks had been removed, and attached to that letter is a letter dated July 15, 1985, confirming that the storage tanks were removed. Surely, Wainwright Equipment was entitled to rely on the written representations of Imperial Oil in 1985 and confirmed in 1989. [ 45 ] Lakeview similarly was aware of potential contamination and asked for appropriate assurances from Commonwealth.

Arguably, Lakeview went a step further than the claimant in Wainwright by requiring an environmental assessment. [ 46 ] A case from British Columbia is also informative here. In Aldred v. Colbeck , 2010 BCSC 57 , 4 B.C.L.R. (5 th ) 364, the plaintiff purchased a residential property from the defendants. Prior to the sale, the parties discussed a building inspection. The defendants advised the plaintiff they had an inspection done two years prior that had found an underground oil tank, but that work had been done in conformity with the recommendations.

The defendants provided the plaintiff with the inspection report as a condition of the purchase. [ 47 ] The plaintiff decided to sell the property six years later. At the time, she answered “no” when asked on a disclosure statement if she was aware of any underground storage tanks on the property. On the advice of her realtor, the plaintiff also retained a professional to inspect the site. The inspector found an oil tank, leading to a change in the sale agreement requiring the plaintiff to remove the tank and remediate the soil contamination.

The cost to the plaintiff for the work was approximately $200,000, which the Plaintiff sought to recoup in part or in whole from the defendants. [ 48 ] When determining liability, the Court looked at a provision in B.C.’s Environmental Management Act that exempts parties from liability for contamination in certain circumstances.

One circumstance is if the person, at the time they became owner, did not know it was a contaminated site and made appropriate inquiries into the previous uses of the site and undertook other investigations in an effort to minimize potential liability. [ 49 ] The Court found this provision protected the plaintiff. She did not know the site was contaminated and reasonably relied on the defendant’s representations and the report they gave her. Nor was the contamination obvious from the surface of the property.

There was nothing to alert the plaintiff that she needed to verify the information from the defendants, at paras 73-74: I find as a fact that Ms. Aldred had no knowledge that the site was contaminated. Moreover, because of what she was told by the Colbecks, and the documentation they provided to her, she had no reason to know or suspect that the site was contaminated... Moreover, the representation made by the Colbecks was clearly intended to persuade her that the tank had been decommissioned and did not affect or threaten to affect the environmental integrity of the property.

Contrary to the submissions on behalf of the Colbecks, this is not an instance in which the doctrine of caveat emptor can apply. I accept

Ms. Aldred’s evidence that she had little knowledge or experience regarding oil tanks and contamination when she acquired the Mathers property. She made enquiries of the Colbecks which prompted the representations made to her.

There was nothing in the nature of those representations that should have caused her to undertake other investigations with a view to verifying the accuracy of what she had been told by the Colbecks. [ 50 ] Lakeview similarly made inquiries and reasonably relied on the Thurber Report’s findings that 1) there was no contamination of concern on the lands, and 2) no further investigations were necessary. It would be too onerous to expect a prospective purchaser to do more. I reject Suncor’s argument that “all” reasonable steps must be taken to satisfy this ground.

Due diligence in this context requires the claimant to have taken reasonable steps in the circumstances, which was done. Nor is it fair to suggest Lakeview should have inherently not trusted the Thurber Report because it was prepared on behalf of the vendor. [ 51 ] As noted, I make my findings on a preliminary basis, as there may be further evidence adduced at trial that could change this analysis. Additionally, findings on due diligence may affect the liability analysis that will eventually unfold on the merits.

Similar to the B.C. legislation discussed in Aldred , due diligence of a purchaser is considered when assessing liability for an Environmental Protection Order under s 129(2)(b)(iii) of EPEA : 129

(1) Where the Director designates a contaminated site, the Director may issue an environmental protection order to a person responsible for the contaminated site.

(2) In deciding whether to issue an environmental protection order under subsection (1) to a particular person responsible for the contaminated site, the Director shall give consideration to the following, where the information is available: (

a) when the substance became present in, on or under the site; (

b) in the case of an owner or previous owner of the site, (

i) whether the substance was present in, on or under the site at the time that person became an owner; (ii) whether the person knew or ought reasonably to have known that the substance was present in, on or under the site at the time that person became an owner; (iii) whether the presence of the substance in, on or under the site ought to have been discovered by the owner had the owner exercised due diligence in ascertaining the presence of the substance before the owner became an owner, and whether the owner exercised such due diligence; ... [Emphasis added] C.

Prejudice [ 52 ] Neither Suncor nor Commonwealth presented any evidence that an extension to the limitation period would prejudice their ability to maintain a defence on the merits. D. Other Relevant Criteria [ 53 ] Commonwealth has not persuaded me that s 218’s scope is limited to parties that cause or contribute to the contamination of lands. The wording of the

section is broad. Its opening paragraph refers to civil proceedings “where the basis for the proceeding is an alleged adverse effect”. The basis of Lakeview’s action is determining liability from the fallout of an alleged adverse effect. Aldred is an example of a case where a former owner was liable even though the defendants in that case did not cause or contribute to the contamination. [ 54 ] EPEA also expressly contemplates the liability of former owners for remediation in its definition of “persons responsible” for a contaminated site, in s 107: Release of Substances

SECTION 107

Interpretation and application 107

(1) In this Part, ... (c) "person responsible for the contaminated site" means (

i) a person responsible for the substance that is in, on or under the contaminated site, (ii) any other person who the Director considers caused or contributed to the release of the substance into the environment, (iii) the owner of the contaminated site,

(iv) any previous owner of the contaminated site who was the owner at any time when the substance was in, on or under the contaminated site, ... [Emphasis added] [ 55 ] I therefore find that Commonwealth falls within the scope of persons contemplated by s 218. 4. Conclusion and Terms of Order [ 56 ] Based on the foregoing analysis, this appears to be the type of case contemplated by s 218, where the harmful effects of contamination were not evident for a number of years, due diligence was shown, and there is no prejudice to the defendants.

However, there are some merits-based implications on due diligence that preclude an outright extension. Accordingly, I find Lakeview has shown a good arguable case on the s 218 factors, and grant an extension of the limitation period subject to a final determination of the issue at trial. Heard on the 22 nd day of March, 2016. Dated at the City of Calgary, Alberta this 18 th day of May, 2016. S.L. Martin J.C.Q.B.A. Appearances: Janet L. McCready for the Plaintiff Darin Hannaford for the Defendant Suncor Energy Inc Patrick Mahoney for the Defendant Commonwealth Business Management Ltd