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No common law duty to clean up the contaminated site before sale, Spring 2007

Buyer Beware
The ancient doctrine of caveat emptor or buyer beware remains alive and well in Ontario, even in cases of contaminated land.

In a recent decision of the Ontario Superior Court of Justice, a purchaser was found to be responsible for its own bargain.

The plaintiff in this case, Antorisa Investments Ltd., purchased four service stations from defendant, Imperial Oil. The agreement provided that the vendor would have no liability for the environmental condition of the property. Five years after the purchase, the plaintiff learned that one of the four service stations was contaminated and brought an action for damages to recover the clean up costs and the lost income associated with the remedial work.

Property Sold As Is
Notwithstanding the fact that the agreement provided that the property was purchased on an “as is” basis and that there was a “no liability” clause, the plaintiff alleged that employees of the vendor made misrepresentations which induced the plaintiff to enter into the agreement. It appears that the alleged statements implied that the properties were “clean”. The vendor did undertake some testing prior to the closing and apparently learned that three of the four properties had some contamination.

Madam Justice Joan Lax held that in this case absent some provision in the contract providing otherwise, the purchaser was acquiring the property “as is”. Her Honour found that the plaintiff had made the business decision not to demand a warranty as part of the agreement and chose not to conduct extensive environmental testing prior to closing. Justice Lax held that, “The common law does not imply any warranty that real estate is sold in any particular state or is fit for any particular purpose – to the contrary, the governing principle is caveat emptor.”

The court also found that the plaintiff failed to establish that the alleged oral representations induced the purchase. It appeared that the plaintiff would have proceeded with the purchase regardless of the statements made as to the state of the properties. The purchaser was a sophisticated commercial party and could have negotiated the allocation of risk regarding contamination if it had decided to do so, but instead accepted the risk.

Buyer beware.

Antorisa Investments Ltd. v. 179265 Canada Ltd. 82 O.R.(3d) 437.