Canada: Canada's Largest Environmental Class Action Judgment Based on Pollution: Nickel Refinery to Pay $36M to Homeowners

Last Updated: September 21 2010

By Steven Rosenhek & Rosalind Cooper (with the assistance of Kimberly Potter, Student-at-Law)

In Canada's largest ever environmental class action decision based on pollution, damages were assessed against Vale (formerly Inco Limited) in the amount of $36 million. This represented compensation to a class of homeowners whose property values declined when it became public that their properties were contaminated with nickel. This was the first environmental class action to proceed to trial in a common law province.

The class action was brought on behalf of approximately 7,000 residents of Port Colborne, Ontario. Inco Limited operated a nickel refinery between 1918 and 1984 that deposited nickel particles, primarily in the form of nickel oxide, onto the properties of the class members. The plaintiffs claimed damages only for the diminution in their property values; their action did not include claims for adverse health effects or personal injury, as certification on those issues had been denied earlier by the court.

After a three–month–long trial, Justice Henderson of the Ontario Superior Court of Justice held that Vale was liable to the plaintiffs under the Rylands v. Fletcher strict liability doctrine and liable in private nuisance. However, Vale was found not liable in trespass or public nuisance. In making his findings, Justice Henderson addressed a number of novel legal issues pertaining to environmental class actions.

Justice Henderson found that Inco was strictly liable for the damage caused by the escape of nickel deposits onto class members' lands. He found that Inco satisfied the two criteria for a strict liability claim derived from Rylands v. Fletcher: a non-natural use of the land and an escape from the land of something likely to do mischief. With respect to the first criterion, Justice Henderson held that a non-natural use of the land constitutes the defendant bringing onto his property something which was not naturally there. He held that it was not relevant that Inco used the land for a lawful commercial purpose in accordance with all environmental and zoning regulations. With respect to the second criterion, Justice Henderson held that although nickel and nickel particles are not dangerous per se, the escape of these elements had the potential to cause damage to neighbouring properties, and therefore the second element of the strict liability criteria was also fulfilled. Justice Henderson further held that a single, isolated escape is not a prerequisite for a strict liability claim; it can extend to a long-term, ongoing escape as well.

Inco's conduct was also found to amount to a private nuisance. There are two distinct branches of nuisance: material physical damage to the plaintiffs' property, and significant interference with the beneficial use of the premises. The class members relied on the first branch, and Justice Henderson found that they made out their claim. Justice Henderson held that he was not required to balance external factors in making this determination; however, even if he was, he held that the public utility of Inco's refinery was outweighed by the harm it caused. Although Inco relied on a series decisions that held that a claim for diminution of property values can only be successful if the plaintiffs have sold or have attempted to sell their properties (and thus realized the loss), Justice Henderson held that these cases were not relevant because they referred to the second branch of nuisance, not the first.

Inco was found not liable in trespass because a claim in trespass requires a direct and physical intrusion by the defendant onto land that is in possession of the plaintiffs, and Justice Henderson held that permitting nickel particles to migrate from Inco's property onto the class members' lands was an indirect intrusion. Moreover, Inco was held not liable in public nuisance because it was not alleged that Inco's conduct affected public health, public morals, public conduct, or the use of a public place.

Justice Henderson also held that the above claims were not statute-barred. He determined that the claims were discoverable not when the contamination occurred, but when most of the plaintiffs knew, or ought to have known, that the contamination had caused a diminution in their property values. Although Inco ceased refining nickel in Port Colborne in 1984, and most of the class members would have been aware of the possibility of nickel deposits on their properties before 1990 (when Inco asserted that the six year limitation period expired), Justice Henderson held that the claims only arose in 2000 after the Ontario Ministry of the Environment publicly distributed a report showing elevated levels of nickel on the plaintiffs' properties, which caused concerns about adverse health consequences.

The damage award was calculated by comparing property values in Port Colborne with nearby Welland. Justice Henderson accepted expert testimony that the uncertainty of the effect of contamination on health and property values in the future amounted to a "disamenity," and so buyers would only purchase property in Port Colborne at a discount.

An appeal from the decision has been launched.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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