The recent decision of the British Columbia Supreme Court, First Capital Realty v. Imperial Oil Limited, emphasizes the “polluter pays” principles of the BC Environmental Management Act (the “Act”) and establishes that a purchaser with full knowledge of contamination may not be responsible for any clean up costs.

The case involved a contaminated property in Nanaimo (the “Property”). The Plaintiff purchased the property from a third party who was not involved in the litigation. Imperial Oil owned the Property until 1993 and operated a gas station thereon until 1991. The third party never used the Property, as a gas station or otherwise. The Plaintiff owned the neighbouring lands and was acquiring the Property for the purposes of development. One of the conditions of the sale was that the Plaintiff investigate the environmental condition of the Property. The Plaintiff did so and it was revealed the Property was contaminated. The Plaintiff proceeded with the purchase with full knowledge of this and there was no adjustment in the purchase price due to the contamination. The Plaintiff subsequently remediated the Property and brought a cost recovery action against Imperial Oil under the Act.  

Imperial Oil took the position that the Plaintiff brought the Property fully aware that it was a contaminated site without seeking a deduction in the purchase price. Therefore, the Plaintiff assumed the risks associated with that contamination including the costs of remediation. The Court held that the fact that the Plaintiff acquired the Property with full knowledge of the contamination did not affect its rights to recover the costs of remediation under the Act.  

The Court emphasized that the “fundamental principle” underlying the cost recovery portion of the Act is that the polluter pays. The Court stated that the Plaintiff made the purchase with the knowledge that the Act allowed it an ability to recover its costs of remediation. The Court acknowledged that if the Plaintiff acquired the Property at a discount due to the contamination, that would be a relevant consideration because a plaintiff must not be compensated twice for the cost of remediation. In this case, however, where there was no discount, and to not allow the Plaintiff to recover would defeat the purpose of the Act. The effect of the Plaintiff learning of the contamination was to make the Plaintiff a “responsible person” under the Act. However, the Court held that this did not change the principles of liability under the Act and the Plaintiff was entitled to recover its remediation costs for the contamination Imperial Oil was responsible for.  

This is a significant decision for the former owners of contaminated property. A purchaser with full knowledge of the contamination can still recover under the Act. A key issue to monitor in the future will be whether a purchaser received a discount and how this is established.