Spring Cleaning: Good News for Brownfield
May 10, 2005
February 16, 2006 Update: The Supreme Court of Canada has refused to hear an appeal of McAfee v. Imperial Oil.
Recently, the province's Supreme Court has twice addressed
issues relating to the clean up of contaminated sites. In one case the Court limited
the City of Vancouver's ability to impose development permit conditions on the owner
of a remediated site. In the other, the Court allowed a Brownfield developer to recover
the costs from a previous owner over 50 years after the pollution occurred. As Brownfield
development becomes more common, cases like these are providing developers with some
Court Limits What City May Require From Developer:
B.C. Supreme Court decision now affirmed by Court of Appeal
By Roy Nieuwenburg
*Updated August 18, 2005*
The B.C. Supreme Court decision, March 18, 2005
As every land developer knows, the City of Vancouver has the power to impose or stipulate
conditions when issuing a development permit. In Imperial Oil Limited v.
City of Vancouver, the Supreme Court of British Columbia considered the ambit and limitations of that power. The
decision will be especially helpful to those developing contaminated sites.
Imperial Oil owns the service station property at
Fraser Street and E. 25th in Vancouver. In 2000, aware of
hydrocarbon contamination, they decommissioned the existing service station, removed the pump
islands and underground tanks, and applied to the City for a development permit to construct a
new split island service station with accessory retail store.
The City made known its concerns about the
environmental contamination from the site onto adjacent City property (i.e. the adjacent streets,
owned by the City). The City was concerned about the effect of contamination on utility lines and
on the health of people working in the utility corridors, and any costs to City taxpayers that
could be associated with the contamination.
By May 2002, the City had approved the development
permit application on conditions which included the following:
[that] clearance shall be
received from the [City’s] Office of Environmental
Protection upon approval of soil related items by the
Ministry of Environment, Lands & Parks [now Water, Land & Air Protection]
Approval in principle was
obtained under the
Waste Management Act (now the
Environmental Management Act
) in December 2003.
The City’s Office of Environmental
Protection required that Imperial Oil execute an
Off-Site Soils Agreement or OSA before it would give the clearance stipulated.
Imperial Oil argued that the OSA would impose on Imperial Oil indeterminate
liabilities to the City and third parties greatly exceeding the liabilities
otherwise imposed by law in relation to contamination from the site. In its
submissions, Imperial Oil summarized the effect of the OSA as follows:
The OSA requires [Imperial Oil] to
agree that it is the "responsible person" for the contamination in question (s. 2.1), and
obliges the oil company to remediate the contamination to "Acceptable Contamination Levels"
that do not exceed the "City Standard" which may be unilaterally prescribed by the City (s. 1)
and to monitor as required by the City's engineer (s. 2.3). It allows the City to remediate the
contamination and charge the cost to the oil company in certain circumstances (s. 3.9) and it
requires the oil company to post a letter of credit to secure its obligations under the
remediation plan (s. 8.1) which may be offset by the City against any "claims" and must
be replenished by the oil company (s. 8.6, s. 1).
The key issue in this case was whether
the City had jurisdiction to require this OSA as a condition to granting a development permit.
The Court held that the City did not. Following are key excerpts from the Court’s reasons:
I do not agree with the City that s.
565A [of the Vancouver Charter] either expressly or by
implication grants an unlimited authority to refuse development permits or impose conditions. I
conclude that s. 565A
contemplates that the powers in relation to development permits, including
conditions to be attached to them, will be exercised only for reasons connected to the appropriateness
and impact of the proposed development.
… The City notes that the OSA essentially ensures
that the costs of environmental remediation are borne by the party responsible for the contamination, and
not by the taxpayers of the City. However, municipal authority to require an OSA cannot derive solely from
a municipal purpose, however compelling that purpose may be. Otherwise, the City could use its power in
relation to development permits to compel the resolution of any issue it has with a developer. Imperial Oil
submitted that this could allow even for expropriation without compensation, which, like the OSA condition
here, could be described as for a municipal purpose and to the benefit of the City and its taxpayers.
Essentially, the Court held that the City could not
leverage its position as regulatory approving body to advance its position as property owner (i.e. owner
of the City streets) by forcing Imperial Oil to enter the OSA and to thereby take on liability relative
to the contamination that would be above and beyond the liability Imperial Oil would otherwise have at law.
This decision obviously will be helpful for developers
and is of particular interest for redevelopment of brownfield sites. However, it must be appreciated that the
City and other regulatory approving bodies tend to be resolute in such matters, and if they can’t get what they
want one way, they might be able to get it another way. In this case, the issue was merely a development permit,
which the City might have been hard pressed to deny. If subdivision or re-zoning or a variance were required
(which involve a broader ambit for discretion), the applicant might be waiting a long while for approval if it
took issue with any conditions stipulated. The example referred to above about "expropriation without compensation"
in practice, ironically, illustrates the opposite – any developer who has given up a part of their property, without
compensation, for a street widening or a "corner cut" understands this. Even so, this case will be important in
establishing the ground rules.
B.C. Court of Appeal
On August 4, 2005 the Court of Appeal affirmed the judgement of the
Supreme Court. Following are key excerpts from the Court of Appeal reasons:
… In my view, it cannot be said that it is necessarily or fairly to be implied that s. 565A authorizes the City to impose a condition requiring the remediation of environmental contamination elsewhere [i.e. off-site] when exercising its authority to regulate the development of a particular parcel of land. The legislative intention in enacting s. 565A to authorize the City to regulate development cannot have been to authorize it to exercise authority beyond the scope of the general authority given.
… The authority given under Part XXVII of the Charter is to regulate development; it is not an authority for the remediation of environmental contamination per se. As is evident in the circumstances of this case, under the governing environmental legislation, that general authority falls within the purview of the office of the Minister of the Environment (formerly the Ministry of Water, Land and Air Protection) …
… To limit the word “conditions” in s. 565A(b) to conditions that bear upon the development in question, is not to stray from its ordinary and grammatical meaning. Rather, it is to give to that word the only reasonable meaning the context in which it is used permits. To broaden the term to allow the City to regulate the clean-up of off-site contamination would create disharmony within the Act as a whole and with the intention of the Legislature.
- Roy Nieuwenburg
Brownfield Developer Recovers Clean-up Costs in
By the Commercial Real Estate Group at Clark Wilson LLP
March 6, 2003
Just last week the British Columbia
Supreme Court ordered a previous owner of a polluted
property in downtown Vancouver to reimburse
90% of the clean-up costs incurred by the current owner,
in redeveloping such "contaminated site".
In Workshop Holdings v. CAE
Machinery, the Court both:
- clarified the "cost recovery" provisions of the
Act or EMA, and
- resolved a number of
liability issues in favour of the current
owner/developer, and therefore against the previous
industrial owner/polluter of the
Good News for Developers
In each respect, the Workshop
case is good news for developers in B.C.,
particularly regarding old industrial, or ‘Brownfield’
- Clarifying EMA Cost Recovery
The EMA was formerly known as the
Waste Management Act. Background
information on the Act can be found in two previous
BCRElinks articles [Parts I and II].
A third article, about insurance coverage for
environmental contamination, and cost recovery
actions, is pending (and will be available at Clark Wilson LLP's Insurance Publications Site).
been in force since 1997, in more or less its present
form, the practical effect of the legislation has been
largely unclear. Only a handful of court cases have
Act and, specifically, interpreted its
provisions for private cost recovery actions against
previous owners/operators of polluted property. That lack
of clarity has included the respective rights and obligations
of present owners and previous owners/operators,
when contamination of the site is cleaned
Workshop is the first case to
squarely address those latter issues, and comes down
firmly on the side of Brownfield owner/developers.
- Resolving Practical Issues in
Favour of Owner/Developers (and Reimbursing Pollution
The B.C. Supreme Court considered the
following issues in Workshop:
- was the site "contaminated"?
- was CAE a "responsible person" under the Act?
- were Workshop, its principals or others also
- was the amount of Workshop’s claim excessive?
- was Workshop’s action barred
by the 30-year ultimate limitation period?
The Facts of the Case
Before discussing those issues,
however, a brief description of the facts in the case is
In 1919, a company
called Canadian Sumner Ironworks ("Canadian Sumner") was
incorporated. In 1924, Canadian Sumner purchased two
lots, and leased the other two, located at
1216-1224 West Pender Street
in what is now downtown Vancouver. Until 1949, Canadian
Sumner operated an iron works and brass foundry on the
Historical business directories indicated that a
company called Ace Welders had occupied the property in
1945, and a trucking company had operated there in the
In 1964, Canadian Sumner changed its
name to CAE Sumner, and in 1965, to CAE Machinery.
In 1960, Annar Klokstad bought the
property, and in 1964, he demolished the old foundry and
built a warehouse. Before erecting that building, he
used some of the contaminated foundry soil as fill,
spreading it around the property.
Between 1964 and 1996, Mr. Klokstad
leased the property to various tenants, including an
auto paint and repair operation and a scrap metal
In 1996, Mr. Klokstad died,
and the property passed to his wife. In 1997, the
Klokstads' son incorporated Workshop for the purpose of
redeveloping the property. His mother remained on title,
as a bare trustee, and became a shareholder of Workshop.
The company obtained to the right to develop and operate
the property, and plans were made to stratify the
property and build a 43 unit commercial building,
complete with an underground parkade.
In 1997, Workshop
retained an environmental consultant, which undertook
both a preliminary and a detailed site investigation,
and subsequently developed a remediation plan and
obtained an approval in principle from the
with the development. During its investigations, the
consultant identified zinc and copper as soil
contaminants on the property, as well as the chemical
‘signature’ of foundry sand. Zinc and copper are the
constituent elements of brass, Canadian Sumner having
operated a brass and iron foundry on the site.
underground parkade was excavated, the contaminated
soils were required to be disposed of at designated
landfill sites because they did not meet the
WMA/EMA criteria for residential fill.
sued CAE for those increased fill disposal costs, as
well as their consultants’ site investigation costs and
related expenses, under the private cost recovery provisions of the
The Issues Decided in the Case:
Was the site "contaminated"?
CAE’s first line of defence was that
Workshop had to establish that the property was a
"contaminated site" under the provisions of EMA. The
Court made short work of this argument, holding that the
consultant’s reports and Province’s approval in
principal of their remediation plan provided ample
evidence of contamination.
Was CAE a "responsible person" under
Second, CAE challenged the
admissibility of corporate records put into evidence by
Workshop, which connected CAE to Canadian Sumner. The
Court rejected this argument too, relying as well on
land title searches indicating Canadian Sumner’s
previous ownership, and an affidavit by a former
employee of Canadian Sumner/CAE.
Were Workshop, its principals or others
also responsible persons?
Third, CAE argued that, even if it was
liable, then the clean-up costs should be shared by
Workshop itself, as well as the Klokstads and/or
previous tenants of the property.
Workshop and its principals the Klokstads, CAE argued
that, as "owners" of a "contaminated site", and
therefore also ‘responsible persons’ under the Act (see
Part I article), Workshop
was itself also jointly and severally liable for the
clean-up costs. As such, any judgment against CAE should
be reduced by apportioning some of the same to
The Court dealt
with that argument in two ways. One, it said that just
because the Klokstads may have known about the previous
use of the property - for the operation of a foundry -
it does not mean they knew or suspected that the site
was contaminated by copper and zinc in concentrations
exceeding those permitted under the Act. As such, the
Klokstads and Workshop were protected from "owner"
liability by the ‘innocent acquisition’ provisions
(section 46(1)(d)) of EMA.
Two, the Court held that the Klokstads
and Workshop had not contributed to the contamination of
the site by spreading foundry soil around the property
as fill, before building the warehouse. The Court
pointed out that the key to liability, under
section 45 of the Act, is the introduction of contaminants
onto a site, and that Workshop and the Klokstads had not
introduced any new contaminants, but merely
redistributed existing soil around the property.
As for liability of others, the Court
held that CAE’s argument that previous tenants had
contaminated the property by their auto paint and
repair, and scrap metal operations, were purely
speculative and simply not supported by any
Was the amount of Workshop’s claim
Fourth, CAE argued that not all of the
approximately $117,000 in costs claimed by Workshop were
attributable to cleaning up the polluted property.
The Court considered all of the
consultants’ invoices, as well as soil testing and
borehole drilling costs and soil disposal costs paid to
the two landfill operators and a trucking company.
Relatively minor amounts were held to be more properly
attributed to removal of an underground storage tank and
sump pump, glass and brick debris, and asbestos, as
opposed to the contaminated soil.
However, the Court held that the amount
claimed was generally reasonable, and ordered CAE to pay
Workshop approximately $106,000 in damages; about 90% of
the amount claimed.
Was Workshop’s action barred by the
30-year ‘ultimate limitation period’?
relied on section 8(1) of the
Limitation Act, which provides that an action may
not be brought "after the expiration of 30 years from
the date on which the right to do so arose."
The simple answer
to this was that Workshop’s claim was based on the
private cost recovery provisions of
created an entirely new cause of action, and did not
come into force until the 1990s. Therefore, Workshop’s
cause of action did not arise until that time, when less
than a third of the ‘ultimate limitation period’ had
passed by the time it commenced proceedings against CAE.
Other Issues and Inquiries
The Workshop case does not answer all
of the many questions surrounding private cost recovery
claims under the Act. However, it does answer a number
of them, and generally uphold the validity of such
claims, by current owners against previous industrial
owner/operators of polluted properties. All in all, this
decision is very good news for developers seeking to
recover their costs attributable to cleaning up
contaminated, or Brownfield sites.