Livco Developments v. Dworschak, 2019 BCPC 45

Citation: Livco Developments v. Dworschak 2019 BCPC 45 Date: 20190315 File No: 180156 Registry: Victoria IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: LIVCO DEVELOPMENTS LTD CLAIMANT AND: JOHN ALFRED DWORSCHAK DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE GOUGE Appearing for the Claimant: Mr. Shauntz Counsel for the Defendant: D.A. Mildenberger Place of Hearing: Victoria , B.C. Date of Hearing: March 11, 2019 Date of Judgment: March 15, 2019 The Issues [ 1 ] The Claimant is the owner of a parcel of land in Saanich, British Columbia. The Defendant is the former owner of the parcel, and sold it to the Claimant in 2017. The Claimant seeks to recover: (

i) the cost of removing and remediating contaminated soil from the

land; and (ii) loss of profit on a resale of the property to a new owner. The claim is founded upon two alternative claims: (

i) an allegation of breach of contract; and (ii) a claim for apportionment of reclamation costs under

Part 5 of the Environmental Management Act SBC 2003, c 53 (“the EMA ”). The Facts [ 2 ] On May 26, 2017, the Defendant, then the owner of the land, entered into an interim agreement for sale of the land to Mr. Shauntz, the sole shareholder of the Claimant. Under the interim agreement, Mr. Shauntz agreed to purchase the property for $810,000 cash, the closing to be on June 30, 2017. The interim agreement included the following term: The seller shall grant access for oil tank scan. If tank found the seller will remove along with any environmental issues as per municipal standards before completion. [ 3 ] Mr.

Shauntz acknowledged that he purchased the property “… on a sort of as-is basis …”. There was an old house on the property, and it was always Mr. Shauntz’ intention to tear down that house so that the property could be redeveloped. The Claimant demolished the house shortly after acquiring title on June 30, 2017. [ 4 ] An oil tank was found on the property before June 30, 2017. The Defendant arranged for the oil tank to be removed at the Defendant’s expense. The municipal fire department expressed itself to be satisfied by the removal of the oil tank. No issues of soil contamination were raised before the closing.

There is no evidence to support an inference that either Mr. Shauntz or the Defendant was aware, or ought to have been aware, before the closing date of the presence of contaminated soil on the property. [ 5 ] Mr. Shauntz assigned his interest in the interim agreement to the Claimant before the closing date. The transaction closed, as scheduled, on June 30, 2017, and title to the property was conveyed to the Claimant on that date. [ 6 ] On February 17, 2018, the Claimant entered into an interim agreement with Mr. Behrouz Saberi for the sale of the property at a price of $925,000.

That interim agreement contained a number of conditions precedent for the benefit Mr. Saberi. One of those conditions precedent read: Subject to the Buyer obtaining and approving an inspection report of the Property on or before March 2, 2018. Mr. Saberi arranged for testing of the soil on the property, and received a report of contaminated soils. As a result, he exercised his right to decline to proceed with the purchase. [ 7 ] The Claimant then arranged for a consultant to assess the extent of contamination and for contractors to excavate and dispose of the contaminated soil.

In so doing the Claimant incurred the following costs: a. soil sampling, testing and report $2,466.51 b. soil excavation $2,228.00 c. soil trucking and disposal $2,160.66 The consultant’s report refers to provincial standards for remediation of contaminated soils, but makes no reference to municipal standards. There is no evidence of applicable municipal standards or requirements. Mr. Shauntz says that I should assume that the municipal standards would be the same as provincial standards.

I am unable to proceed on such an assumption in the absence of evidence. [ 8 ] On April 23, 2018, the Claimant entered into an interim agreement for sale of the property to Mr. Ranjeet Wirk at a price of $918,000. That transaction was completed as agreed on June 29, 2018. Legal Principles [ 9 ] The governing principles were recently reviewed in Honing v. Phinney [2018] BCJ No. 780 ; 2018 BCSC 702 ; 48 CCLT (4 th ) 310 ; 20 CELR (4 th ) 150 . I attempt a

summary of those principles in the paragraphs which follow. [ 10 ] Generally speaking, at common law, the doctrine of caveat emptor applies to contracts for sale of land. A purchaser who wishes to protect himself against latent defects (such as contaminated soils) must insist upon a contractual term under which the vendor warrants the condition of the property and/or expressly assumes responsibility to remedy any defects which may be discovered. [ 11 ] There are four exceptions to this general principle : (

i) breach of contract: ( ii) active concealment (i.e., fraud); (iii) non-innocent misrepresentation; and (iv) an implied warranty of habitability in the case of newly-constructed homes. [ 12 ] Liability may arise under the EMA in circumstances in which the common law does not impose liability.

Section 45 of the EMA provides that, subject to certain exceptions set out in

section 46, a former owner of a parcel of contaminated land is a person responsible for its remediation. A person who invokes one or more of the exceptions stated in

section 46 carries the onus of proving the facts necessary to invoke the exception on which she relies: EMA ,

section 46(3 ) . [ 13 ] The only exception which might apply in this case is that provided by

section 46(10(d): an owner or operator who establishes that … at the time the person became an owner or operator of the site, … the site was a contaminated site, … the person had no knowledge or reason to know or suspect that the site was a contaminated site, and … the person undertook all appropriate inquiries into the previous ownership and uses of the site and undertook other investigations, consistent with good commercial or customary practice at that time, in an effort to minimize potential liability,

There is no evidence that the Defendant made any inquiries into the state of the soils on-site in this case, with the result that theexception does not apply. [14] Section 47(1) of the EMA provides that: A person who is responsible for remediation of a contaminated site is absolutely, retroactively and jointly and separately liable to anyperson or government body for reasonably incurred costs of remediation of the contaminated site, whether incurred on or off thecontaminated site. [15] On application by one or more people responsible for remediation, section 47(9) of the EMA requires the court to apportionremediation costs among other persons responsible for remediation “… in accordance with the Regulations.” The governing regulationis section 35(2) of the Contaminated Sites Regulation BC Reg 11/2018 (“the Regulation”), which requires me to consider:

a) the price paid for the property by the person seeking cost recovery;

b) the relative due diligence of the responsible persons involved in the action;

c) the amount of contaminating substances and the toxicity attributable to the persons involved in the action;

d) the relative degree of involvement, by each of the persons in the action, in the generation, transportation, treatment, storage ordisposal of the substances that caused the site to become contaminated;

e) any remediation measures implemented and paid for by each of the persons in the action;

f) other factors relevant to a fair and just allocation. Application of the Principles in This Case [16] In this case, there is no evidence of fraud, wilful concealment of the contamination or misrepresentation. Common-lawliability, if any, can arise, if at all, only under the contractual term quoted in paragraph 2, above. [17] Under that term, the Defendant was obliged to remove any oil tanks and contaminated soil “before completion.” The questionis whether the parties intended that the obligation to remove contaminated soil should continue to exist after completion of thetransaction: Fraser-Reid v.

Droumtsekas (SCC), [1980] 1 SCR 720. In addressing that question, I am to apply theprinciple stated by Justice Smith in Athwel v. Black Top Cabs Ltd. 2012 BCCA 107 , [2012] BCJ No. 420; 2012 BCCA 107; 348 DLR (4th) 83; 30 BCLR (5th) 17 @ paragraph 42: The contractual intent of parties to a written contract is objectively determined by construing the plain and ordinary meaning of thewords of the contract in the context of the contract as a whole and the surrounding circumstances (or factual matrix) that existed at thetime the contract was made, unless to do so would result in an absurdity.

Where the language of a contract is not ambiguous (that is,when viewed objectively it raises only one reasonable

interpretation), the words of the written contract are presumed to reflect the parties'intention. An

interpretation that renders one or more of the contract's provisions ineffective will be rejected. It is difficult to reconcile the words “before completion” (which appear in the contractual term in this case) with a mutual intention thatthe obligation to remove contaminated soils should continue to exist after completion. As I construe the clause, the parties intended thatany contaminated soil issues would be remediated by the Defendant before completion of the contract.

If it were the intention of theparties that the Defendant would also be responsible for remediation of contaminated soil issues discovered after completion, I wouldhave expected to see a contractual term similar to one of the following: The vendor warrants and represents that the soil on the property contains no contaminants in excess of the limits prescribed by anyapplicable government standards. or The vendor will be responsible for remediation of any contaminated soils on the site, whether discovered before or after the completiondate.

Instead of that, the interim agreement contained a provision which is quite specific as to the vendor’s obligation. It is not a warranty or arepresentation. Rather, it is a covenant to do two specific things, both before completion. The Defendant did the first thing - it removedthe oil storage tank. It did not do the second thing (remove contaminated soil) because it was not asked to.

One would have thought thatthe existence of an old oil storage tank would have alerted both parties to the possibility of contaminated soil on-site, but it apparently didnot. [18] If I am wrong about that, and the Defendant’s contractual obligation survived completion of the transaction, the Claimant facesa further difficulty. The Defendant’s obligation was to remediate “… as per municipal standards …”.

There is no evidence of anyapplicable municipal standards in this case, and, for that reason, no way to assess the nature or extent of the Defendant’s obligation. [19] For those reasons, the Claimant’s claim would fail at common law. [20] However, the Defendant is clearly a person responsible for remediation under

section 45 of the EMA unless he can bringhimself within the scope of one of the exceptions set out in

section 46. He carries the onus on that issue. The Defendant tendered noevidence in this case, with the result that the onus is undischarged and the Defendant is obliged to contribute to remediation costs. [21] There is little, if any, evidence relevant to the factors to be considered under section 35(2) of the Regulation. There being no

evidentiary basis for apportionment, I think that I should fall back on the old maxim that “equality is equity”: Affiliated FM Insurance Co. v. Quintette Coal Ltd. (BC CA), [1998] BCJ No. 100; 156 DLR (4th) 307; 48 BCLR (3d) 8 @ paragraph 53. Inthis case, the facts provide no reasonable basis for anything other than an equal division, and so I apportion the remediation costs, as setout in paragraph 7, above, equally between the Claimant and the Defendant. [22] The Claimant also seeks to recover: (

i) the difference between the agreed sale price to Mr. Saberi ($925,000) and the sale priceto Mr. Wirk ($918,000); and (ii) interest on the sale price to Mr. Saberi from the agreed closing date of his purchase to the closing dateof the Wirk purchase. Those might well be recoverable heads of damages in a successful action at common law, but they are notremediation costs as defined in section 47(3) of the EMA. [23] I observe that legal costs are recoverable under section 47(3)(

c) of the EMA, but no such claim was advanced in this action, withthe result that I am not called upon to resolve the apparent conflict between section 47(3)(

c) of the EMA and section 19(4) of the SmallClaims Act RSBC 1996, c 430. [24] During pre-trial proceedings, the contractor who excavated the old oil tank offered to pay the Claimant $1,250 in settlement ofany potential claim against that contractor. Mr. Mildenberger says that that sum should be deducted from any damage award in thisaction because the Claimant failed to mitigate its loss by accepting the offer. I disagree.

If there were any basis for suggesting that thecontractor is a person responsible for remediation, the proper course would have been for the Defendant to issue a third party notice tothe contractor, presenting a claim for contribution under the EMA. Disposition [25] The Claimant will have judgment for 50% of each of the amounts referred to in paragraph 7, with court order interest at theRegistrar’s rate from the date on which each was incurred to the date of these reasons for judgment. The parties may speak to the issueof costs if they are not able to agree on that matter. __________________________ T Gouge, PCJ