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Can the purchaser of contaminated sites sue the neighbour who originally caused the contamination? The Ontario Court of Appeal will hear a buyer’s appeal in Midwest v. Thorco on January 27, 2015.

Midwest purchased industrial property in 2007, next to an old industrial site covered with tanks. It first obtained a Phase I Environmental Site Assessment that, for unexplained reasons, recommended not bothering with a Phase II. After purchase, it turned out that Midwest had purchased a site heavily contaminated with petroleum hydrocarbons which had migrated, sometime in the previous 40 years, from the Thorco site next door. Midwest’s expert testified that migration of contaminated groundwater was ongoing.

Midwest sued Thorco and Thorco’s president, but (for equally unexplained reasons) not the environment consultant that had produced the over-optimistic Phase I ESA.

Midwest called evidence that conditions on the Thorco site were very bad, and that there were large amounts of free product floating on the groundwater under the Midwest site. However, Thorco successfully argued at trial that:

  1. As the Ministry had ordered Thorco to remediate the Midwest site, and as the contamination was not interfering with Midwest’s use of its property, Midwest had suffered no recoverable loss, and
  2. Midwest could not prove that that the level of contamination had worsened since 2007, when Midwest bought its property.

The court dismissed Midwest’s lawsuit, with costs to Thorco. Midwest appealed, seeking punitive damages and an order requiring Thorco to pay $1.3 million for remediation of the Midwest site and a protective barrier.

The case is important because of the widespread (but, I think, mistaken) belief among some real estate solicitors and agents that a buyer can (knowingly or negligently) buy previously contaminated land and then sue the source of the contamination for the cost of cleaning up that pre-existing contamination.

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