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Real Property Law - Sale of land - Quality defects - Latent

Thursday, March 09, 2017 @ 7:00 PM  

Appeal by the plaintiff from a decision dismissing the action as statute-barred. The appellant commenced the present action for damages for soil contamination by hydrocarbons in April 2014 that allegedly migrated from the adjacent property that had been used as a gas station until 2004. The appellant had purchased the property in 2012 as part of a transaction involving the acquisition of 22 commercial properties. The purchase was subject to various conditions, including that the purchaser was satisfied as to the environmental condition of the properties. Phase I of an environmental site assessment in March 2012 identified potential contamination of the property by the historic gas station at the adjacent property and from an active dry cleaner located nearby. On March 8, 2012 the appellant waived all conditions for the purchase transaction, including environmental conditions. In its statement of claim, the appellant asserted that it was not aware of soil and groundwater contamination at its property until September 2012. The motions judge concluded that the appellant had become aware of sufficient material facts to form the basis of the action by March 9, 2012. In the alternative, she held that the appellant had more than a sufficient basis for an action by March 30, 2012 when soil and groundwater sampling laboratory results were made available to the appellant and showed exceedences of regulatory criteria. The motion judge also stated that, even if the appellant did not know about the drilling results until May 2012, when it received a draft Phase II environmental site assessment report that appended the results, the appellant ought to have known of its claim against the respondents, and did not exercise due diligence.

HELD: Appeal allowed. The motion judge erred in finding that the appellant knew or ought to have known of its claim more than two years before it commenced the action. The motion judge erred in equating the appellant’s knowledge of potential hydrocarbon contamination, or suspicion of such contamination, based on the information generated by a Phase I assessment with actual knowledge that the property was contaminated by hydrocarbons. Any information available to the appellant at that time about actual contamination at the property was historical. It was not evidence of contamination of the property over six years later, nor was it interpreted as such by the appellant’s environmental consultant. While the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The motion judge also erred in ignoring the relevant circumstances of the appellant’s purchase of the property, such as its involvement in a multi-property transaction and its waiver of all conditions. The fact that the appellant was directing and paying an environmental consultant was not sufficient to ground the conclusion that the appellant knew about the test results as soon as they were reported by the laboratory to the consultant. Nowhere in her reasons did the motion judge refer to the fact that the appellant was involved in purchasing 22 properties. This was part of the context in which its knowledge ought to have been assessed. It was unreasonable for the motion judge to draw an inference about the appellant’s knowledge of the test results without considering such circumstances. These errors were material to her conclusion that the appellant had knowledge of its claim, based on its suspicions of contamination, and her alternative conclusion that it knew or ought to have known of its claim when laboratory results from the Phase II subsurface investigations were available at the end of March 2012.