Smith v. Inco Limited, 2010 ONSC 3790
In one of the largest-ever environmental class actions in Canada,
Vale (formerly Inco Limited) has been ordered to compensate a group
of homeowners for the stigma of negative publicity about long-term
contamination of their properties.
After a three-month common issues trial, Mr. Justice Henderson of
the Superior Court of Justice, in a decision released on July 6,
2010, held that the class in Smith v. Inco had suffered a
diminution in the value of their residential properties resulting
from elevated levels of nickel in the soil (the action was formerly
titled Pearson v. Inco, until the representative plaintiff
was changed; Inco Limited was acquired by Vale in 2007). Comprised
of over 7,000 homeowners whose properties in Port Colborne, Ontario
are close to the Vale refinery, the class was awarded aggregate
damages of $36 million. Under the judge's allocation,
homeowners closer to the facility are to receive higher individual
amounts. Although the emissions of nickel had begun in 1918 and
ended when nickel ceased being refined at the facility in 1984, the
judge found that the homeowners' claim arose only after the
Ontario Ministry of the Environment made certain disclosures about
the effects of the contamination on health in the fall of 2000. The
action did not include claims for personal injury or adverse
effects on health, class certification of those issues having
earlier been denied by the court.
While Vale admitted prior to the trial that the refinery was the
source of the nickel contamination, the judge found that the
discharge of nickel was a private nuisance and that the company was
strictly liable to the class for the discharge as a result of a
failure to prevent the escape of a dangerous substance, pursuant to
the Rylands v. Fletcher doctrine. A claim of public
nuisance was dismissed on the basis that there was no allegation
that the company's conduct had affected public health, public
morals or public conduct, or the use of a public place. A claim of
trespass was also dismissed on the basis that the intrusion of the
nickel particles onto the class members' properties was
indirect, not direct.
The test for a claim under the Rylands v. Fletcher
doctrine was made out on the judge's findings that nickel
refining was a non-natural use of the land and the escape of the
nickel particles from Vale's land had the potential to cause
damage to neighbouring properties. It was not relevant that the
operation of the facility had been in compliance with all
environmental and zoning regulations. The judge also held that the
Rylands doctrine applied regardless of whether there had
been a single isolated escape or a continuous long-term
escape.
The judge held that a private nuisance was established by the
occurrence of material physical damage to the class members'
properties from nickel emissions. He concluded that he was not
required to balance external factors such as the severity of the
harm, the utility of the company's conduct, the character of
the neighbourhood or the plaintiff's sensitivity. Even if he
was required to do so, he concluded that the harm suffered
outweighed the public utility of the defendant's business
operations. He also found that damages were an essential element of
both private nuisance and the Rylands claim. Thus, in
order to determine if the defendant's conduct created
liability, it was necessary to determine whether the class members
had suffered harm. He further found that the claim was not barred
nor diminished by the fact that some of the properties had been
remediated or that class members had not sold or attempted to sell
their properties.
The judge found that prior to 1990, most class members would not
have been aware, or ought not to have been aware, of the fact that
nickel in the soil could affect their property values, as they had
no reason to be concerned about any adverse effects from nickel in
the soil. In fact, according the judge, the message to the public
as of early 2000 was that everything was fine. The judge found that
beginning with the release of an MOE phytotoxicological report in
early 2000, the focus of the message to the public changed such
that there was after that point a concern for human health due to
levels of nickel in the soil. Accordingly, class members would have
concluded after that time that the nickel contamination could
affect property values.
Vale was not successful in arguing that the claim was barred by the
expiry of the relevant limitation period on the basis that it was
well known prior to the fall of 2000 that there was a problem with
nickel soil contamination in the area. The judge did find that most
class members would have been aware, or should have been aware,
prior to 1990 of the possibility that nickel particles may have
been in the soil on their properties and that those particles came
from the refinery. But he went on to conclude that they did not
have a cause of action until they knew or ought to have known that
they had suffered damages. That occurred only after the message to
the public changed in 2000 and was widely publicized. The fact that
a small number of people in the class knew or ought to have known
about the relevant facts prior to the fall of 2000 was not enough
to affect the claim of the entire class, the judge held.
The damages were based on a comparison of property values in Port
Colborne and nearby Welland. Even accepting that properties
adjacent to a large industrial facility would have reduced values,
the judge found that the rate of increase of property values in
Port Colborne was lower after the 2000 public disclosures than they
otherwise would have been, due to the negative publicity concerning
the nickel contamination and its possible affects on human health.
In essence, the judge found that a quantifiable stigma in the form
of lost value attached to the contaminated properties.
Vale has publicly stated that it sees grounds for an appeal.
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