Interesting Court of Appeal decision regarding damages arising from the purchase of contaminated property


The Ontario Court of Appeal has recently rendered an interesting decision dealing with damages in the event of the purchase of contaminated property, Lionhead Investments Inc. and Petro-Canada. See the Ontario Court of Appeal decision from late August of this and the trial decision from 2006 for details.

The decision deals with an industrial property contaminated by the Petro-Canada distribution terminal in North York. The plaintiff's predecessor in title (a related company) acquired a gasoline-contaminated industrial property at a reduced price because of the contamination. The party responsible for the contamination, Petro-Canada, had agreed to clean up the contamination, although not to a pristine standard, and indemnify the purchaser for any loss arising from the contamination. After the plaintiff sold the property (at a profit but less than it would have made if the property had not been contaminated), it sued Petro-Canada for the reduced profit attributable to the stigma. Interestingly, the amount that it said it lost due to the stigma was more or less equivalent to the discount it got on the property due to the contamination in the first place.

The Court of Appeal endorsed the trial judge's finding that the plaintiff had suffered no loss and dismissed the appeal holding that "[t]o allow the appellant's claim would be to compensate the appellant for a loss it did not suffer and, it would appear, to require Petro-Canada to pay the appellant an amount it had already paid to North America [the third party that sold to the plaintiff's predecessor in title]."

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