In May 2000, judgment was rendered in the case of Tridan Developments Ltd. v. Shell Canada Products Ltd. (see this column in the October/November 2000 edition). Not surprisingly, the decision was appealed and the Court of Appeal released its decision on January 3, 2002, ruling that a property owner whose land has been contaminated is entitled to have the land remediated to a pristine condition.
Readers may recall the facts of the case, which involved a Shell gas station in Ottawa that spilled approximately 9,000 litres of gasoline into the soil. Tridan, the adjacent property owner to the west of the Shell property, discovered contamination beneath its property and commenced an action against Shell. Tridan sought extensive damages for the contamination, which extended to a depth of approximately 12 feet below ground on the Tridan property.
At trial, Tridan took the position that Shell was obliged to pay whatever costs were necessary to clean up the Tridan property to a pristine state, which it claimed was the condition that existed before the spill. Shell took the position that there was no need to undertake active remediation of the Tridan contaminated lands on the basis that, over time, the contaminated soil would biodegrade. Shell argued that the contaminated soil was 3 to 5 metres below ground, had no impact on the building or the Tridan property, was not impairing the use Tridan made of the land, and did not pose a risk to the health and safety of any of the occupants or plant life. Shell argued that the environment ministry guideline standards at the time of cleanup should apply.
The court held that Tridan was entitled to have its property put back to the same condition that existed before the spill, namely, a pristine state. The Court of Appeal upheld this decision, stating that it could not say that the trial judge had erred in deciding that Tridan was entitled to reparation to a pristine state. The Court of Appeal held that the damages to Tridan would not be eliminated by remedation to the point of the guidelines, and there would be residual loss of value.
Tridan also took the position at trial that there was a decrease in the value of its property as a result of the stigma of contaminated property, even after a cleanup is carried out. A property with a history of contamination, argued Tridan, has a negative impact on that property’s marketability. Given a choice between a contaminated site and one that is pristine, a buyer will choose one that has never been contaminated.
At trial, the court held that a plaintiff is entitled to the cost of repairing his property and any difference in value between its former worth and that of the property when repaired. As such, Tridan was entitled to damages in an amount that would put it in the same position that it would have been in had the spill not occurred. The court determined that there would be a stigma attached to the Tridan property, which would adversely affect its value. The value placed on the stigma was the difference between the value of the Tridan property before the spill occurred and its worth after reparation.
The Court of Appeal disagreed with this finding and held that the knowledge that a site was previously polluted does not amount to stigma. The court stated that there is no stigma loss at the pristine cleanup level and that a pristine cleanup of a property results in no residual loss of value. The court found that the assessment of stigma damage at $350,000 by the trial judge was based on a cleanup to guideline standards and that it would be more economical for Shell to proceed to the pristine level at an additional cleanup cost of $250,000 with no stigma damage.
This decision has implications for operators of landfill sites whose activities may cause contamination. Based on the Court of Appeal decision, the removal of solid waste and remediation to guideline levels may not be sufficient to remedy the situation, and the affected property owner may nevertheless be entitled to further compensation. Landfill operators could also be required to remediate to a level beyond that set out in applicable guidelines in order to restore any affected property to the condition that existed prior to contamination.
The decision fails to take into account the significance of standards and, in particular, the margin of safety they provide. It is for this reason that what is considered “clean” has been historically based on government standards. Further, “stigma” is based on the knowledge that a potential purchaser might have regarding the existence of contamination at a property. If the levels are below government standards and have no effect on the use that may be made of the property and the purchaser has no knowledge of the past contamination one wonders why the property would have any stigma attached to it at all.
Rosalind Cooper, LL.B. is a partner with Fasken Martineau DuMoulin LLP, with offices across Canada. Ms. Cooper is based in Toronto, Ontario.