Contaminated land: the presence of pipes connected to an underground tank that were visible before the sale does not automatically constitute a warning sign of a soil contamination problem

In the Placements Beauvais-Chabot v. Fogel decision, rendered in 2014, the Court of Appeal ruled that the mere presence of a pipe that might constitute an indication of the presence of an underground tank is not a certain warning sign of a soil contamination problem.

In this case, the buyer of a multi-residential building with sixteen (16) units who discovered after the sale that his land was contaminated by hydrocarbons sued his seller for latent defects, seeking reimbursement of the decontamination costs.

In defence, the seller pleaded that the soil contamination problem was not a latent defect, but rather an apparent defect since it was possible for the buyer to see before the sale that there were supply pipes connected to an underground tank coming out of the ground. The seller argued that the presence of pipes was sufficient evidence of the presence of underground tanks.

The trial judge nevertheless concluded that the presence of the pipes, which might allow for suspecting the presence of underground tanks, did not constitute an indication of soil contamination. The Court of Appeal upheld this decision:

[4] La juge est consciente du caractère apparent de certains tuyaux et du fait que cela pouvait constituer un indice de la présence de réservoirs souterrains. D'ailleurs, elle énonce la position de l'appelante qui l'invite à conclure que le vice était apparent, mais elle la rejette en raison des faits particuliers de l'affaire. Elle s'exprime ainsi :

[…]

[32] En effet, les photos prises par l'évaluateur de la Caisse populaire montrent clairement que les tuyaux sont visibles lors de l'achat.

[33] Or, le demandeur soutient que ni lui ni son inspecteur ne remarquent les tuyaux en question, pas plus que l'évaluateur de la Caisse populaire n'en fait mention dans son évaluation.

[34] Au surplus, le demandeur souligne qu'à l'acte de vente, il est écrit que [TRADUCTION] « l'immeuble ne déroge pas aux lois et règlements concernant la protection de l'environnement », ce qui, selon lui, s'ajoute à la garantie légale.

[35] Il plaide que la présence de tuyaux n'est pas un indice que les sols sont contaminés.

[36] Il n'a pas tort. Ce n'est pas la présence de réservoirs inutilisés qui contrevient à la loi, mais plutôt la contamination des sols, et celle-ci ne pouvait être décelée par un examen raisonnable.

[…]

[38] En conséquence, le Tribunal considère que le vice était caché, et que le demandeur ne pouvait le déceler par un examen raisonnable.

[…]

[6] En l'espèce, la juge a eu raison de conclure que la contamination des sols constituait un vice caché.

It should be noted that in this case, the seller was unaware at the time he sold the building in question that tanks were buried in the ground and that supply pipes were coming out of the ground, especially since, at the time of the sale of the building to the buyer in 2004, no one had suspected the presence of oil tanks. Moreover, the seller even told the buyer, in a letter of response to the latter’s formal notice, that the buildings in question were not and had not ever been equipped with underground tanks.

Consequently, how could a seller who was himself unaware of the presence of the pipes coming out of the ground and of the very existence of the underground tanks when he sold the building to his buyer claim that the latter should have discovered a problem of which the seller was unaware, the existence of which he did not even suspect? To quote author Pierre-Louis Bazinet (in his 2015 article entitled “Satisfaction de la condition de non-apparence d'un vice environnemental par l'acheteur d'un immeuble en en faisant un examen approfondi : notions et indice du vice”), “a seller who is unaware of the defect cannot require the buyer to know the property better than he does by having to discover the defect of which he himself is unaware.”

In 2016, in the judgment rendered in Laquerre v. Joseph, which was later upheld by the Court of Appeal in 2018, the Superior Court ruled that a property’s soil contamination problem was not apparent despite the presence of exterior pipes that could have alerted the buyers to the possible presence of an underground tank.

In this case, the buyers had failed to follow the recommendations of their pre-purchase inspector, who recommended an additional inspection to inspect certain elements located on the exterior of the property which could not be viewed due to the accumulation of snow on the ground.

Although the court concluded that the buyers had failed to act in a prudent and diligent manner, it nevertheless concluded that the evidence presented did not allow for conclusively finding that the presence of the pipes would have been observed as part of an additional inspection and that, had it been observed, it would have resulted in a recommendation to proceed with further inspections:

[68] Le Tribunal est d'avis que les Acheteurs n'ont pas fait preuve de prudence et de diligence en choisissant de ne pas faire effectuer l'inspection visuelle extérieure complémentaire de la Propriété recommandée par AmeriSpec. Un acheteur prudent et diligent aurait demandé à l'inspecteur d'effectuer une seconde visite afin de lui permettre de compléter l'inspection extérieure de la Propriété. En choisissant de ne pas donner suite à cette recommandation, les Acheteurs ont assumé le risque découlant d'une inspection incomplète.

[…]

[73] De l'avis du Tribunal, il est possible qu'une inspection extérieure complète de la Propriété aurait permis à AmeriSpec de constater la présence des tuyaux sortant du sol et ancrés au mur extérieur situé à l'arrière de la Propriété, visibles en l'absence de neige au sol.

[74] Par ailleurs, les Acheteurs ont raison d'affirmer qu'il est également possible qu'une telle inspection n'aurait pas donné lieu à un tel constat. Les Acheteurs ou leur inspecteur aurait-il été négligent pour autant? Le Tribunal ne le croit pas.

[75] La preuve administrée ne permet pas au Tribunal de conclure qu'il est probable, et non seulement possible, que la présence des tuyaux aurait été notée par l'inspecteur et l'aurait mené à recommander un examen plus poussé.

[…]

[80] Compte tenu de ce qui précède, le Tribunal est d'avis que la contamination des sols constitue un vice caché, puisqu'il n'a pas été démontré, de manière prépondérante, que cette contamination était apparente en raison de la présence des tuyaux extérieurs. Aux yeux du Tribunal, il ne s'agit pas d'un «vice qui peut être constaté par un acheteur prudent et diligent sans avoir besoin de recourir à un expert ».

It is pertinent to add that the sellers told the buyers before the sale that, to their knowledge, there was no underground tank.

However, what would have happened if the buyers had had the recommended additional inspection performed and the inspector had noted the presence of the famous pipes during this additional inspection and had advised the buyers to proceed with a more thorough examination in connection with possible contamination and yet no more thorough examination had been done by the buyers?

In such a case, we are of the opinion that the outcome of this case could have been different and that the court could have deemed the contamination problem to have been apparent. Indeed, as we pointed out in a previous post, failure to perform the inspections and expert assessments recommended by the pre-purchase inspector before the sale will be fatal to a claim for latent defects, although it must be kept in mind that a pre-purchase inspector’s general recommendation to perform an inspection does not automatically constitute a positive indication of the presence of a latent defect.