1218388 Alberta Ltd. Plaintiff - v. -, 2017 ABQB 236

Court of Queen’s Bench of Alberta Citation: 1218388 Alberta Ltd v Reifel Cooke Group Limited, 2017 ABQB 236 Date: 20170331 Docket: 1601 05854 Registry: Calgary Between: 1218388 Alberta Ltd. Plaintiff - and - Reifel Cooke Group Limited Defendant _______________________________________________________ Reasons for Judgment of J.T.

Prowse Q.C., Master in Chambers _______________________________________________________ [ 1 ] The defendant Reifel Cooke Group Limited (“RCG”) agreed to purchase a 1.1 acre parcel of land in Fort McMurray, Alberta from the plaintiff 1218388 Alberta Ltd. (“121”) [ 2 ] The sale did not close. [ 3 ] 121 sued RCG for damages for not closing the sale. RCG defended and counterclaimed for the return of its deposit. [ 4 ] RCG seeks

summary judgment on its counterclaim for the return of its deposit. [ 5 ] RCG’s argues that two conditions precedent to the sale were not satisfied, thus ending the contract and entitling it to the return of its deposit.

[ 6 ] For the reasons which follow I decline to award

summary judgment to RCG. The quality of the evidence provided by RCG as applicant for

summary judgment [ 7 ] As indicated above, RCG takes the position that two conditions precedent to the sale agreement were not satisfied, and so the contract is at an end. [ 8 ] RCG does not submit an affidavit in support of its application, choosing instead to rely on admissions resulting from a Notice to Admit Facts which it served on 121 pursuant to Rule 6.37 of the Rules of Court. [ 9 ] Rule 7.3(2) states that an application for

summary judgment: must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met [ 10 ] The relevant ground referred to is contained in Rule 7.3(1)(a), namely, that there is no defence to RCG’s counterclaim. [ 11 ] I assume, without deciding, that this Notice to Admit is ‘other evidence’ as required by Rule 7.3(2), but the real issue is the nature of the admission obtained by RCG pursuant to the Notice to Admit. [ 12 ] RCG has obtained the admission that various pieces of correspondence (including emails) were sent and received by the parties to the litigation, but it has not sought (and therefore not obtained) admissions that the assertions contained in the correspondence, or in the reports attached to the correspondence, are true. [ 13 ] To illustrate the difficulty caused by this approach, consider the position of RCG (to be discussed later in these reasons) that it did not receive a remediation certificate issued by Alberta Environment confirming all on-site and off-site remediation on the land had been completed. [ 14 ] RCG attempts to support this position by referring to one of the items of admitted correspondence, namely, a letter from RCG’s solicitor to 121’s solicitor dated April 18, 2016. [ 15 ] In that letter RCG’s solicitor asserts that the remediation certificate is inadequate because there are, for example, problems with metals or salinity, whereas the remediation certificate applies only to hydrocarbons.

But all we have to back up that assertion is an unsworn report, attached to the correspondence. There is no proof that there is any difficulty with metals or salinity on the subject land, or that this was one of the reasons that RCG did not approve the remediation certificate. [ 16 ] While this may seem like a highly technical objection, it is not. [ 17 ] RCG should have supported its application for

summary judgment with an affidavit from a deponent from RCG, swearing that there was a problem with salinity and metals contamination and that this is one of the reasons why RCG did not ‘approve’ the remediation certificate. Then that deponent could have been cross-examined on his/her affidavit, and the Court would have fulsome information to consider on this

summary judgment application. [ 18 ] While this Court often does interpret a contract as part of a

summary judgment application (see Tottrup v Clearwater , 2006 ABCA 380 , 2006 CarswellAlta 1627) consideration needs to be given to how complicated the factual matrix is surrounding the formation of the contract. [ 19 ] As stated in Nexxtep Resources Ltd. v Talisman Energy Inc. , 2013 ABCA 40 , 2013 CarswellAlta 147, at para 20 : Contracts are not to be interpreted in a vacuum.

Contextual evidence of surrounding circumstances, disclosing facts known to the parties at the time the contract was made, is part of the interpretative process. [ 20 ] The facts concerning the surrounding circumstances in this case are involved, complex and crucial to the outcome. In my view, the facts regarding the surrounding circumstances should be determined by a trial judge prior to adjudicating the meaning of the words used in the contract. [ 21 ] In addition, RCG is not allowed to use hearsay evidence in support of its application for

summary dismissal. See Rule 13.18. [ 22 ] As stated, the only evidence RCG brings forward is a package of correspondence (including reports) with no evidence that the matters asserted in that correspondence (and attached reports) are true. [ 23 ] It is for RCG, as applicant, to persuade the Court on an application for

summary judgment that the existing record before the Court can lead to an adjudication and disposition that is fair and just to both parties: Whitecourt Power Limited Partnership v Elliott Turbomachinery Canada Inc. , 2015 ABCA 252 at para 9 . [ 24 ] By restricting its supporting materials to a Notice to Admit which only establishes that various items of correspondence were exchanged between the parties, RCG had not persuaded me that the existing record before the Court can lead to an adjudication and disposition that is fair and just to both parties. [ 25 ] On these grounds alone, I dismiss RCG’s application for

summary judgment. [ 26 ] In case my ruling in this regard is overturned, I will now address the various arguments presented to the Court. Background facts

[ 27 ] Following are some facts, from the affidavit of 121’s deponent: • 121 owned a parcel of land in Ft. McMurray, Alberta on which a Husky gas bar had been located. The underground fuel tanks for the gas bar had leaked; • The underground tanks had been removed and the site cleared of buildings; • 121 had made earlier attempts to remediate the site of the gas bar by injecting hydrogen peroxide throughout the former underground tank and pump island areas.

This had been partially successful; • 121 decided to complete the remediation by means of a “dig and dump” plan which involved excavating and removing the remaining contaminated soil and bringing in clean fill to replace the removed soil, and building a concrete barrier along the property line; • The purchaser, RCG, had previously had the land under contract, but let that contract expire.

RCG was aware of RCG’s “dig and dump” remediation plan. • The process being followed by 121 was as follows: - It would remediate the land, using the “dig and dump” plan; - It would then obtain a post remediation environmental report from its own consultant; - It would submit that post-remediation report to Alberta Environment and seek a remediation certificate under

section 117 of the Environmental Protection and Enhancement Act RSA 2000, c.E-12 (the “Act”). [ 28 ] While the “dig and dump” remediation was underway, RCG entered into a new contract to purchase the land from 121.

The contract contained two conditions precedent, found in one clause, worded as follows: This Offer is made subject to the following condition: Condition Precedent Subject to the Purchaser receiving and approving a reliance letter , on or before October 31, 2012, from Levelton Consultants Ltd. along with a remediation certificate issued by Alberta Environment confirming all on-site and off-site remediation has been completed . This condition shall automatically extend every 30 days until the written confirmation is received by the Purchaser.

Upon Purchasers receipt of reliance letter form Levelton Consultants Ltd. and remediation certificate issued by Alberta Environment, the Condition Precedent will be satisfied. The Condition Precedent is for the sole benefit of the Purchaser. The Purchaser has the right to waive the Condition Precedent in its sole discretion within the time stipulated and proceed with the transaction herein contemplated. (emphasis added) [ 29 ] The wording of this clause was provided by RCG’s environmental consultant.

Did RCG receive and approve a ‘reliance letter’ from Levelton Consultants Ltd.? [ 30 ] RCG received a reliance letter from the successor to Levelton Consultants Ltd.

However, the hearsay evidence indicates that RCG did not approve the reliance letter. [ 31 ] RCG does not complain that the letter came from WSP as successor to Levelton Consultants Ltd. rather than from Levelton Consultants Ltd. itself, so that is not an issue. [ 32 ] As stated above, the remediation certification process was dependent on 121’s consultant (WSP as successor to Levelton Consultants Ltd.) preparing a post remediation environmental report for submission to Alberta Environment, in order to obtain the

section 117 remediation certificate. [ 33 ] If RCG proceeded with the purchase, and later found out that WSP had done a negligent job of preparing its environmental report, then any claim which RCG might attempt to make for damages against WSP (for instance, if Alberta Environment subsequently revoked the remediation certificate on the basis that the WSP report was negligently prepared) would be met with the answer that 121 was WSP’s client, not RCG’s, and so no duty was owed by WSP to RCG.

It makes commercial sense for the contract to provide a mechanism in the form of a reliance letter whereby RCG would be able to claim directly against WSP. [ 34 ] The reliance letter provided by WSP addressed to RCG, confirmed that RCG “may rely on the Report as though it was addressed to them at the time of issuance ...” [ 35 ] However, the reliance letter from WSP contained the following proviso: WSP makes no representation or warranty as to the sufficiency of our scope of work for your purposes, nor does WSP make any different or additional representations beyond what is contained in the report [ 36 ] RCG is said to have rejected the reliance letter on the basis that it contained the above quoted proviso.

If this was established by non-hearsay evidence then 121 would potentially need to argue that RCG’s decision was not bona fide in the sense that no party acting honestly could have refused to approve the reliance letter. [ 37 ] If RCG provided the necessary non-hearsay evidence then arguably 121 would need to provide evidence that it was known or ought to have been known by both sophisticated parties to this contract that this kind of proviso would inevitably have been contained in

this type of environmental report, or in a ‘reliance letter’ extending such an environmental report to a purchaser. I assume that a witness with sufficient experience and expertise in the industry could establish if this is so. [ 38 ] I note, for instance, that (unknown to 121 at the time) RCG had obtained its own environmental report from Shelby Engineering Ltd. which contained arguably a much more restrictive proviso.

Shelby limits its liability to its own client, RCG, to the amount of the fee charged by Shelby to RCG for the report. [ 39 ] In any event, 121 has not provided evidence from an expert that these types of provisos were inevitably contained in reliance letters (perhaps at the insistence of the insurers of the parties issuing the letters). This is another reason why I have concluded that the existing record before the Court is not sufficient to allow an adjudication and disposition that is fair and just too both parties.

Remediation certificates generally [ 40 ] The remaining condition precedent involves the requirement that RCG be provided with a remediation certificate. [ 41 ] A remediation certificate is not the same as an environmental opinion that land is not contaminated. [ 42 ] A remediation certificate, issued under

Section 117 of the Act , pertains to the remediation of a specific release of a substance or substances into the environment – in this case, apparently, the release of substances from the Husky gas bar. [ 43 ]

Section 117 of the Act states: The Director or an inspector may issue a remediation certificate in respect of land where (

a) a release of a substance into the environment has occurred, (

b) the release has caused, is causing or has the potential to cause an adverse effect, and (

c) remediation of the land has been carried out in accordance with (

i) the terms and conditions of any applicable approval, (ii) the terms and conditions of an environmental protection order made in respect of the release, (iii) the directions of an inspector or the Director, or (iv) this Act . (emphasis added) [ 44 ] I concur with the following general submissions made by 121’s counsel regarding the nature of certificates issued pursuant to

section 117 of the Act : The Remediation Certificate Regulation, Alta Reg 154/2009 , (the “Remediation Regulation”) at s.3 , sets out the requirements for remediation certificate applications, including delineation of the remediated area, identification of the remediated substance and its location, and identification of plans to effectively monitor, mitigate or prevent adverse effects of the substance outside the remediated zone.

The focus of the legislation is remediation of areas that are subject to contamination, and for obvious reasons, a remediation certificate would not confirm remediation of areas outside of the remediated zone. The Remediation Regulation provides the following with respect to issuance of a remediation certificate, including specific provisions to address “off-site” contamination: 4(1) The Director or an inspector may issue or refuse to issue a remediation certificate pursuant to

section 117 of the Act .

(2) The Director or an inspector may issue a remediation certificate under subsection (1) in respect of the substance that is the subject of the remediation if the substance within the remediated zone has been remediated in accordance with the Guidelines.

(3) If the substance that is the subject of the remediation is also present on land outside the remediated area, the Director or an inspector may issue a remediation certificate under subsection (1) in respect of the substance that is the subject of the remediation (

a) if the substance within the remediated zone has been remediated in accordance with the Guidelines, and (

b) if the Director or inspector is of the opinion that there is an adequate plan to monitor, mitigate or prevent any adverse effect that may be caused by the substance. Did RCG receive and approve a remediation certificate from Alberta Environment confirming that all on-site remediation had been completed? [ 45 ] Prior to the purchase agreement being entered into, a representative of 121 provided to RCG the following description of the proposed remediation work: To date we have identified the extent of the cleanup as: The area in the location of the former pump islands as triangular, 25 m along King St. and 20 m in both directions to the east. About 250 sq. m.

The depth of the contamination is below 6.5 m for all and from 6.5 m to 7.5 m at the outside ends of the triangle and 6.5 m to 9 m in the center. So we are dealing with a small dig and dump. Excavation and stock piling of 3000 cu m and 750 cu m of excavate and dispose. · We have identified a disposal site for the contaminated soil and estimated the fees. Wilson has provided us with an estimate for excavation, hauling, makeup and compactions and suggested their work can be completed in 1week.

To satisfy [Alberta Environment] we will need to install a barrier along the King St. property line. likely, lsoflex PVC 45 mil supplied by Nilex. We also have estimated costs for the soils testing and the compaction.

All that said the most difficult part of this is the near vertical cut necessary along a portion of the King St property line that is 9 m deep. [ 46 ] On or about February 9, 2016, 121’s agent provided an Alberta Environment remediation certificate to RFG. [ 47 ] With respect to on-site remediation, the certificate stated: In connection with a release (or exceedance) within: Former Mohawk at B124 Franklin Ave ... Ft.

McMurray, Alberta Based on information reviewed the remediation results meet Alberta Tier 1 (or amended) coarse grained soil guidelines and AB Tier 1 groundwater guidelines for benzene, toluene, ethylbenzene, xylene (BTEX) and petroleum hydrocarbon (PHC) fractions F1, F2, F3, F4 for commercial land as of July 20, 2012. This remediation certificate is issued only for the substances indicated in the application and the remediated area shown on the attached plan.

The top of the remediated zone is 6 meters below ground surface and base depth is 9.5 meters. [ 48 ] By means of hearsay evidence, as already discussed, RCG suggests that it refused to approve the remediation certificate, with respect to on-site remediation, because: • There remain contaminants of potential concern, within several areas of the property, including petroleum hydrocarbons, metals and excess salinity; • There remain areas of potential concern ... on ... the property that require further investigation; • The property is overburdened with stockpiles of construction debris; and, • Additional investigation of the Property is required to determine the extent to which pollutants, including petroleum hydrocarbons and metals, have infiltrated the soil of the property. [ 49 ] This response from RCG shows that RCG is attempting to equate the requirement for a remediation certificate with a report that the whole 1.1 acre site being purchased was free from contaminants.

This is clearly wrong. [ 50 ] Both 121 and RCG were aware, prior to entering into the contract, that the remediation being undertaken was the remediation of the Husky gas bar site.

The certificate which was called for under the contract dealt with the release of substances from the Husky gas bar location, not things such as construction debris left on-site or issues with other portions of the 1.1 acre site not connected to the Husky gas bar issue. [ 51 ] Unless there were other meetings or correspondence, which might be put forward in an affidavit from a deponent from RCG, indicating that other problems were within the contemplation of the parties when the contract was entered into, it appears that the objections raised by RCG quoted in paragraph 31 above, were invalid. [ 52 ] The use by RCG of arguably extraneous and invalid reasons to reject the remediation certificate provides 121 with an argument that RCG’s response was not bona fide, in that it is arguable that no purchaser acting honestly would have refused to approve a certificate which appears to have resolved the on-site remediation issue with respect to the escape of substances from the Husky gas bar.

Did RCG receive and approve a remediation certificate from Alberta Environment confirming that all off- site remediation had been completed? [ 53 ] The certificate which Alberta Environment did issue contained the following wording with respect to off-site remediation: The off-site portion of this release ... has a risk management plan in place that has been accepted by affected third parties. [ 54 ] RCG’s hearsay position with respect to off-site remediation is that: • There remain areas of potential concern ... off the property that require further investigation • Contaminated areas off the property have not been remediated [ 55 ] As noted above, the certificate provided is arguably exactly the type of certificate for off-site remediation that one would

expect, given section 4(3) of the Remediation Regulation , quoted earlier. [ 56 ] In my view 121 has an arguable case that any rejection of the remediation certificate due to problems with off-site remediation was not bona fide in the sense that no purchaser acting honestly would have refused to accept the certificate. The duty of good faith contract performance [ 57 ] To this point I have dealt with the

interpretation of the relevant conditions precedent given the surrounding circumstances when the contract was entered into in August of 2012. [ 58 ] There is another event which occurred in February of 2013 which gives 121 an arguable position that RCG ought not to be allowed to reject the remediation certificate presented to it in April of 2016. [ 59 ] As an aside, the delay of approximately 3 ½ years in receiving the remediation certificate was due to a backlog of applications at Alberta Environment. [ 60 ] In February of 2013, just 6 months after the parties entered into the purchase contract, 121 provided RCG with a letter from Alberta Environment, advising that: The only official closure that the department offers for remediated sites is the Remediation Certificate.

To be eligible to apply for a remediation certificate, you need to demonstrate 2 things: 1) That all the on-site contamination has been remediated; 2) That the off-site contamination is being risk-managed appropriately and that the risk management plan is supported by all potentially affected third parties. Currently Husky is working on developing a risk management plan and getting affected third parties to provide their support.

Until this task is complete, you won’t be able to apply for a remediation certificate. [ 61 ] RCG may have sat back for approximately another 3 years and then rejected the very type of remediation certificate that they knew 121 was going to be able to obtain.

This gives 121 an arguable position that RCG has, by silence in this regard, mislead 121 about a matter directly linked to the performance of the contract [ 62 ] 121 has an argument that, even if the remediation certificate provided in 2016 did not comply with the contractual requirement, any attempt of RCG to take this position would be rejected by the Court as a breach of RCG’s duty to perform its contractual duties honestly and reasonably. See Bhasin v Hrynew , 2014 SCC 71 , 2014 CarswellAlta 2046, [2014] 3 S.C.R. 494 at para’s 63 to 66.

Conclusion [ 63 ] For the reasons set out above, I dismiss RCG’s application for

summary judgment. Costs [ 64 ] If the parties cannot agree on costs of this application they may approach me for a ruling in that regard. Heard on the 19 th day of January, 2017. Dated at the City of Calgary, Alberta this 31 st day of March, 2017. J.T. Prowse, Q.C. M.C.Q.B.A.

Appearances: Kenneth E. Staroszik, Q.C. Aimee E. Louie for the Plaintiff 1218388 Alberta Ltd. Janice A. Agrios, Q.C. Kennedy Agrios LLP for the Defendant Reifel Cooke Group Limited