Liability during property transfer – Cascades Lagoons

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In this short clip, Dianne Saxe of Envirolaw.com and Yves Faguy of Nimonik discuss recent issues around liability after a commercial contract has been performed – or not. Watch the video to find out more and what risks you run when selling or buying industrial property in Canada.

Title: Liability during property transfer – Cascades Lagoons
Length: 2:59
URL: http://www.nimonik.ca/2011/09/liability-during-property-transfer-cascades-lagoons/

Note: Unclear word/s is/are time-stamped and highlighted.

Yves:
Do you have a sense of what’s coming up in your head?

Diane:
Well, one of the case is, again it depends a little bit who the audience is but the Cascades paper decision that I was just reading, I think is really interesting because it’s a decision of Cascades created certain environmental issues in the course of running a paper mill. They sold the mill and paid the buyer, I forgot the exact statistics, but something in the general area of 2.5 million dollars to take over the environmental issues and fix them. And then they paid them another half million dollars to dredge a particular lagoon. And the recipient of the money took the money, spent the money, didn’t do the lagoon, (and) didn’t deal with any of these environmental issues. So they took all the money reportedly spent it all (and) didn’t deal with the issues. So now the ministry is coming back to Cascades and saying ‘You have to clean this up’ and Cascades is saying ‘We already paid for it the current owner won’t… we have a plan with the current owner that won’t let us carry out, this is just not workable, it’s not fair, it’s not workable.’

Yves:
What’s the outcome of this case?

Diane:
The outcome was that they the Environmental Review Tribunal said ‘We don’t care that you already paid for this at least once or twice. You dug your own grave here because you gave them the money without making sure that they would spend it with what you gave the money for, so have to do it again.’

Yves:
So they might have cause an action against the new owner.

Diane:
They absolutely do but the point of this is that the new owner may have spent the money. There’s no particular reason. They absolutely can sue the new owner but you have to wonder whether there’s going to be any assets there. So the moral there, this is something that we see fairly regularly is people think that they can make a commercial deal and someone else agrees to take the liability and they’re protected.

What we’ve seen several times coming out of the courts is it doesn’t have to be fair in what we would normally consider fairness if the government wants to order you to clean stuff up and they have the statutory right to do it because you had something to do with the property they can do it. So the kinds of deals that are still being negotiated are often not enforceable deals. I think that would surprise a lot of people that you can pay for a cleanup and have to pay for it again.