Suing the Lawyer ~ Contaminated Soil

(Ontario Real Estate Source)

It seems that consumers are looking for targets for their own mistakes. So, frivolous lawsuits are only a few dollars away. Sue somebody, and hopefully they will settle quickly.

But, that’s not quite so easy when it comes to professional liability. Yes, there’s errors and omissions insurance, however, the defendant has a vested interest in the outcome since it effects their professional reputation and the insurer by settlement may just be opening the floodgates to further claims. This is the type of case which will likely be defended aggressively.

The purchasers, Mr. and Mrs Graham together with their children instituted legal proceedings against their own lawyer, their own real estate agent, the vendor, the municipality and two trucking companies. They claim that the property they acquired was contaminated.

In July 2002, the Grahams bought a residential property in Quinte (near Kingston, Ontario) from George Diamond.

Here are some important points about the agreement:

• It was conditional upon the Grahams arranging satisfactory financing by the end of July, 2002, otherwise, the offer would become null and void and the deposit monies would be returned to the Grahams in full, without interest.

• the Grahams acknowledged receipt of a Vendor Property Information Statement (vendor statement) which was completed and signed by the vendor

• the vendor was to supply to the Grahams any survey in his possession, if one existed, on or before July 12, 2002.

• the vendor agreed to have the septic tank pumped on or before the date of closing, set for August 16, 2002.

On July 12, 2002, the Grahams waived all the conditions, at which time the agreement became final and binding.

On July 23, 2002 the defendant Kaufmann, a practising solicitor, was contacted by a real estate agent named Kevin Kelso, who asked Kaufmann to act on behalf of the Grahams in connection with the closing of the sale.

Kaufmann was only contacted by the Grahams to act on their behalf after all of the conditions had been waived by them.

There were no conditions in the original agreement for:

1) an environmental assessment or

2) a home inspection.

The vendor’s statement, now known as a Seller Property Information Statement or SPIS (for short) indicated that the vendor was unaware of:

• any environmental assessment or

• soil contamination of the property or the immediate area,

• any work orders against the property, or

• any waste dumps, disposal sites or landfills in the immediate area, or

• problems with the septic system.

As you can probably imagine, there were problems, big problems. The plaintiffs allege that they have all suffered severe respiratory issues and related medical problems. The property had been vacant for two years before the Grahams submitted their offer.

Now, eight years afterwards, we are still dealing with some of the preliminary matters in the lawsuit. Obviously, the lawsuit will take several more years. In essence, the plaintiffs conetend that the soil on the property was contaminated. To give you some inkling into the substance of the lawsuit, here are there claims:

• . ……the Plaintiffs have sustained serious and permanent injuries including but not limited to injuries to the respiratory system, ear, nose, and throat, coughing, itchy eyes, post-nasal drip, sore throats, fever and fatigue. They have suffered from asthma, nose bleeds, and ear infections. They have also each sustained traumatic neurosis and emotional shock.

• ………severe pain and suffering including headaches, cognitive deficits, deficits with organizational skills, problem solving, nervousness, depression and insomnia. Their enjoyment of life has been permanently lessened and they have been forced to forego numerous activities in which they formerly participated.

• ………a drastic depreciation of the value of the Plaintiffs’ property and there is little or no market for their property and they continue to suffer serious financial distress.

This matter came on for hearing in Motions court, to determine whether or not there was a triable issue concerning the plaintiff’s solicitor Kaufmann.

Here were the allegations:

• Kaufmann failed to advise the Grahams that the right of way to the property was privately owned, and that the Grahams and other residents with a right of way would be responsible for arranging and financing repairs on the right of way.

• Kaufmann neglected to advise the Grahams of the effects that living on a private laneway would have upon them.

• Kaufmann also failed, neglected, and/or refused to ensure that a proper environmental site assessment was performed at the property.

• Kaufmann failed, neglected, and/or refused to advise the Grahams of the standard practice of having a home inspection performed on the property before the closing of the sale.

The defence filed on behalf of the solicitor pleaded that:

• he accepted the retainer from the Grahams after all of the conditions in the agreement had been waived by them, and

• that he had completed all of the searches with respect to title and

• had certified title to the vendor in accordance with standard solicitor’s practice

• he had carried out his role as the purchasers’ solicitor in a competent manner.

The motions court Judge summarized the law, applied the principles set out in Wong v. Hui (1999) in the Ontario Court of Appeal and offered the following analysis:

Analysis

Mr. Kaufmann’s obligations to the Grahams as solicitor for the purchasers, have to be looked at in the light of the fact that he received the agreement only after all of the conditions had been removed by the Grahams.

Furthermore, there is no evidence to suggest that the Grahams ever alerted Kaufmann as to the potential existence of environmental problems, soil contamination, structural or any other problems related to the property.

• Even if he had been alerted to such potential problems, I am not convinced that Kaufmann’s retainer to close the transaction could be extended to include an obligation on his part to examine the possibility of the existence of such problems.

• Once Kaufmann had completed the title search and found the property free and clear of any encumbrances and/or title problems going to the root of the title, the Grahams were then obligated to close.

• Advising the Grahams not to close under those circumstances would most certainly be subjecting them to a lawsuit for specific performance and/or damages.

• There is no law to suggest that the Grahams were entitled to either a home inspection or environmental assessment unless there was a condition in the agreement to that effect.

• The property in question had been vacant for two years prior to the agreement being entered into, and the Grahams were well aware of that fact.

• There is no evidence to suggest that they were not aware of the existence of a private right of way and of their obligation to share in road maintenance, in fact the direction given by them to their then solicitor is evidence to the contrary…..

• Finally, did Kaufmann have any obligation to negotiate a “better” deal than the one negotiated by the Grahams themselves?

• Firstly, he was never instructed to do so, and secondly, had he been so instructed, the Grahams were not entitled to a “better” deal by virtue of their signed agreement of purchase and sale.

• In effect, the Grahams are asking the court to find that Mr. Kaufmann should have closed the barn door some days after the horse had bolted the stable.

• I find that there is no genuine issue for trial with respect to any of the allegations made by the plaintiffs against the defendant Kaufmann. Therefore, the defendant Kauffmann’s motion for summary judgment is granted.

Comment

This is interesting in that the case is already eight years into litigation, and this is still a preliminary matter, where one defendant is let out of the lawsuit.
Clearly, this case is still before the courts and it is going to be expensive. So, all we know at this point is that the solicitor didn’t do anything wrong.

Kaufmann acted appropriately in the context of closing a real estate transaction. Sure, two matters were missed, namely an environmental assessment and a home inspection. But, who missed them? The real estate agent is still in the lawsuit.
Usually things are fine. However, in this case I highly suspect that the property was indeed contaminated. Now, of course, the property is worthless, everyone in the area knows about it. Who would buy it now?

That is the reason why the lawsuit also includes the municipality and two trucking companies. The soil was probably contaminated soil brought in “as fill” from somewhere else.

Due to the complete financial loss and the consequent personal injuries to family members everyone was included in the lawsuit. Suing the solicitor here was perhaps a stretch.

The motions court Judge makes it quite clear that the solicitor does not have to negotiate a better deal than the client already negotiated. That naturally increases any potential liability of the real estate agent.

Make sure that there are proper conditions. Ensure that proper advice is obtained during the due diligence period. And, remember that the first due diligence period runs from the agreement date to the waiver of the conditions. That would have been the right time to test the soil and inspect the property. After the conditions are waived, it’s too late.

The plaintiffs’ claim here is that those two provisions, had they been included, were the last clear chance to avoid this whole mess.

Without them, the deal was closed and they ended up with a contaminated, worthless property, financial stress, and personal injury.

I’ll post the final result in a year or two, provided the matter goes to trial.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com