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What is Required to Prove a Loss of Rental Income Claim in an Environmental Contamination Case?

4 minute read

In a decision released earlier this year, Donleavy v. Edwards,[1] the Court of Appeal for Ontario upheld a trial decision dismissing a claim for loss of rental income following an oil spill from a fuel oil tank on the plaintiffs’ residential property. For a more complete discussion of the Court of Appeal’s decision and the other aspects of this case, see my two previous posts: Homeowners’ Contributory Negligence for Fuel Oil Tank Leak Affirmed by Court of Appeal; and Court of Appeal Confirms Correct Causation Test in Environmental Contamination Case.

While the plaintiffs’ action was successful in part, the trial judge dismissed their claim for $28,800 for loss of rental income as speculative and not supported by the evidence.[2] The plaintiffs provided only oral evidence that they had been renting the residence for six months at the time of the spill, but did not provide any documentary evidence, such as a written tenancy agreement.[3] The trial judge noted it was unclear why the claim was for 36 months of lost rental income and why the plaintiffs could not have mitigated their damages.[4] She also indicated that in the absence of evidence to the contrary, a number of factors could have contributed to the plaintiffs ceasing to be landlords in the future some of which would be unrelated to the oil spill such that the burden of proof had not been met.[5]

Finally, the trial judge drew an adverse inference from the plaintiffs’ refusal to produce their home insurance policy and noted she was “concerned about the potential for double recovery if the $750,000 paid to the plaintiffs includes indemnity for a portion of the rental income allegedly lost.”[6]

On appeal, the Court of Appeal found no reversible error. Justice van Rensburg held the plaintiffs had the “onus of satisfying the court that they suffered damages in the form of lost rental income” and noted “the trial judge was not satisfied on the evidence … that the claim was made out.”[7] The Court of Appeal noted with approval the trial judge’s comments regarding the various factors which could have led the plaintiffs to cease renting the residence and the absence of evidence of mitigation. Justice van Rensburg also observed that the trial judge “was entitled, as she did, to take into account the respondents’ refusal to produce a copy of their insurance policy, which would have assisted in determining whether any part of the indemnity they had received from their own insurer was in respect of lost rental income.”[8]

Ultimately, the Donleavy decisions confirm the basis principle that plaintiffs must prove, with evidence, their damages. Even where a rental property is rendered inhospitable by environmental contamination, the landlord will bear the burden of demonstrating the fact and the quantum of their loss of rental income.

[1] Donleavy v. Ultramar Ltd., 2019 ONCA 687.

[2] Donleavy v. Ultramar Ltd., 2017 ONSC 7438, at para. 208.

[3] Donleavy v. Ultramar Ltd., 2017 ONSC 7438, at paras. 204-205.

[4] Donleavy v. Ultramar Ltd., 2017 ONSC 7438, at para. 204, 206.

[5] Donleavy v. Ultramar Ltd., 2017 ONSC 7438, at para. 205.

[6] Donleavy v. Ultramar Ltd., 2017 ONSC 7438, at para. 208.

[7] Donleavy v. Ultramar Ltd., 2019 ONCA 687, at para. 117.

[8] Donleavy v. Ultramar Ltd., 2019 ONCA 687, at para. 117.

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Jacob R. W. Damstra

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