Wasted Dreams

Municipalities exhaled a sigh of relief when the Ontario Court of Appeal overturned the January 2011 decision of the Superior Court of Justice in the case Biskey v. Chatham-Kent (Municipality) on November 21, 2012. This case involved a couple (the Biskey’s) who were determined to build their dream-home on a newly purchased property, however, they purchased a former dump-site.

The Biskey’s (respondents), purchased a property from a couple (the Kaminskis) which was formerly owned by the appellant, Chatham-Kent Municipality. The property was zoned for agricultural use and sold by the municipality to the Kaminskis in early 2002 for a purchase price of $35,000. Subsequently, the respondents purchased the property for $80,000 and intended to construct a new home.

At the time of purchase, the respondents were unaware that the property had previously been used as a dump and that an environmental site assessment and report was conducted on behalf of the municipality (the Jagger Hims Report) prior to the sale to the Kaminskis. The municipality disclosed the report to the Kaminskis but when the respondents purchased the property this report was never disclosed to them by the sellers or the municipality.

The respondents then applied for a building permit in 2003 and their contractor discovered that there were problematic soil conditions as a result of the properties history. They obtained a copy of the Jagger Hims Report, the Golder Report which was produced in relation to the respondents building permit application, and they also had their own engineering report produced to support this application. All of these documents contained detailed information pertaining to the previous use of the property and its appropriateness as a site to build on.

Prior to the building permit being issued by the municipality the respondents filed a claim against the municipality, the vendor, and the real estate agent for $350,000 in damages related to negligence, nuisance and negligent misrepresentation and another $100,000 for aggravated, exemplary and punitive damages. This claim was later amended to include causes of action associated with breach of contract and breach of the Environmental Protection Act, R.S.O. 1990, c. E-19 and increased to $2 million. This amount was based on environmental assessment costs, clean-up costs, and increased costs associated with construction and the diminution in property value as a result of the “stigma” associated with the property because of its prior use as a dump.

After this claim was brought forth, the respondents also received an offer from the previous owners to buy back the property for the original purchase price ($80,000). They refused this offer and instead proceeded with construction.

Prior to trial a settlement was reached with the vendors and the real estate agent. At trial, the municipality was ordered to pay damages in the amount of $386,142.82 which accounted for the additional construction costs, environmentally related costs, the reduction in value due to the stigma associated with the property, and miscellaneous costs. Chatham-Kent municipality appealed this decision and the Court of Appeal focused on the damages that were awarded.

The Court of Appeal began by noting that the respondents were fully aware that the property had previously been used as a dump prior to building. A significant amount of information (reports) was disclosed to the respondents pertaining to the fact that there would undoubtedly be additional costs associated with construction and environmental issues, and that the value of a home on such a property would be diminished due to the stigma associated with its prior use. Additionally, the respondents filed a statement of claim prior to construction which revealed that they were fully aware of these additional costs and the reduction in value. They also refused to accept the offer from the previous owners (Kaminskis) for a full refund of the original purchase price, at which point they had estimated that they had only incurred 25,000 in damages. The respondents proceeded with construction regardless.

This led the Court to agree with the municipality’s submission that the trial judge had erred in relation to the damages that were awarded for the additional costs related to construction, the environmental issues, and the reduction in value. The Court stated that:

“When the [respondents] decided to reject the Kaminski offer and to proceed with construction in the knowledge that they were building on a dump site and that they would incur added costs, any causal link with the alleged negligence of Chatham-Kent was broken… from that point forward, the [respondents] were on their own.”

Legally, the Court did not think that the respondents had any enforceable right to require the municipality to compensate them when they decided to take on the substantial risk of constructing a home on a property they knew to be contaminated as a result of its prior use. The appeal was allowed, the trial judgement was set aside, and the action was dismissed. Furthermore, the municipality was entitled to the costs associated with launching an appeal and the costs of trial. You can access the Court of Appeal decision by clicking here.

It is important as a real estate agent or vendor to note that while the settlement has not been reported, no doubt a payment was made by both the vendor and agent. In each jurisdiction across Ontario there will be a source to determine the location of landfills both closed and open. In the County of Simcoe both the Barrie District Ministry of Environment and the Corporation of the County of Simcoe have a compiled list of all landfills open/closed, private and municipal.

You should also obtain a copy of the Official Plan for the municipality in question. If you are an agent who intends to represent a vendor or purchaser of rural properties you should determine who the source of the information is and become familiar. If proper diligence is not done by the agents it is possible more than the commission on the specific property will be in jeopardy.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.