Can a landlord be sued for historical contamination potentially caused by its tenant?

A recent decision on a summary judgement motion underscores the difficulty inherent in suing a landlord for contamination caused by its tenant.

In Sorban Investments Ltd v Litwack, 2017 ONSC 706, several Defendants successfully brought a motion for summary judgement dismissing the plaintiff’s claims against them. The Plaintiff owns land abutting the property formerly owned by the Defendants, and was seeking damages in nuisance, strict liability (Rylands v Fletcher), and negligence as well as under section 99 of the Environmental Protection Act. The Plaintiff’s property became contaminated by PCE and other chemicals used in dry-cleaning operations, the fact of which was discovered in 2010. In the early- to mid-1990s, the Defendants leased their property for use as a dry cleaning operation. The Defendants sold the property in 2007.

The Court did not address whether the Plaintiff could establish that the Defendants’ land was a source of the contamination on the Plaintiff’s land. Instead, it assumed for the purpose of the motion that it was.

Among other findings of fact, the Court found that the Defendants did not know that their dry-cleaning tenant was emitting contaminants; that prior to 2006 the Defendants had no reason to believe that their land was contaminated or was the source of the contamination on the Plaintiff’s land; that from about 2006 to 2007 the Defendants had reason to, and did in fact, investigate whether their land was a potential source of contamination; and that the Defendants acted reasonably in their investigations of the contamination.

The Court confirmed that landlord liability in such instances flows from the foreseeability that the nuisance would occur as an inherent part of the activity to be undertaken on the property. As espoused by the Divisional Court in its decision in Durling v Sunrise Propane Energy Group Inc, 2013 ONSC 5830, a landlord may be held liable for the actions or nuisance of its tenants only “when the use from which the damage or nuisance necessarily arises was plainly contemplated by the lease.”

In this case, there was no written lease in evidence, and there was no evidence one had ever been entered into. There was no evidence that the Defendants had authorized their tenant to contaminate the Defendant’s land; were involved in the operation of the dry-cleaners; had any knowledge that any escape of contaminants had occurred; or were aware of the contamination until 2006. Moreover, the nuisance created by the tenant, assuming nuisance was ultimately established, was not foreseen or foreseeable as “inherently part of the activity to be undertaken”—namely, a commercial dry cleaning operation. Even after the Defendants had discovered contamination on their property, the Defendants were advised by their environmental consultant that no remediation was necessary and had no reason to believe the contamination was migrating to the neighbouring property.

In terms of negligence, the Court agreed once again with the Durling court that the mere fact of being a landlord does not establish sufficient proximity to ground a duty of care to an abutting landowner. Finding a duty of care in such circumstances would have the effect of burdening landlords with the duty to involve themselves in the activities undertaken by their tenants on their properties in order to protect themselves from liability.

Only rarely does a landlord potentially owe a duty of care to third parties for the negligence of a tenant. As has been held by the Superior Court in Canadian Tire Real Estate Ltd v Huron Concrete Supply Ltd, 2014 ONSC 288, the geographic proximity of a landowner’s property to another property may be sufficient to ground a duty of care to the owner of that abutting property. However, for a landlord landowner of an abutting property to owe a duty of care related to the negligence of its tenant, it must be foreseeable that the tenant’s activities are inherently unsafe, dangerous, or illegal such that the alleged harm to the abutting property was likely to result. The facts must be “out of the ordinary” for a landlord owner of an abutting property to be found owing a duty of care to a third party.

The Defendants were also assisted by the fact, agreed by the parties, that the contamination was historical and not ongoing. By the time that the Defendants had discovered their lands were contaminated, the Plaintiff’s lands had already been contaminated (which it alleged occurred in 2006). There would also be no duty of care owed if the Plaintiffs could not establish that the lands were contaminated prior to the spring of 2007, when the Defendants sold the property.

The Court had little difficulty dismissing the Plaintiff’s section 99 claim given both the lack of evidence of a “spill,” as defined in the EPA, and the lack of evidence that the Defendants either owned or controlled any pollutant immediately prior to its first discharge.