Canada: "Owner Pays vs. Polluter Pays": Recent Ontario Cases On The Doctrine Of Fairness

Under Ontario's regime for the issuance of clean-up orders, certain types of orders may be issued to persons (past or present) who own, occupy, or exercise control over property or a source of contamination. There is no explicit requirement in the legislation for a finding of fault and there is no statutory allocation scheme. As a result, there is an inherent tension between the fault-based principle of "polluter pays" and the liability exposure of the "innocent" owner, occupant or manager of a contaminated property.

Until very recently, "innocent" owners and other exposed parties derived some comfort from cases such as the Appletex1 decision, where the Environmental Review Tribunal (formerly Environmental Appeal Board, or EAB) endorsed a number of fairness factors that the Tribunal might take into account in determining the appropriate scope of an order. However, the application of these fairness factors has been revisited in a set of cases decided by the Tribunal in 2009-2011. These decisions appear to strike a new balance between the competing principles of "polluter pays" and "owner pays" by asserting as paramount legislative objectives in maintaining environmental protection over considerations of fairness.

In Corporation of the City of Kawartha Lakes v. Director2, the City appealed an order requiring that it complete clean-up work arising from a furnace oil spill on residential lands which had entered the City's storm sewers discharging into Sturgeon Lake. The City (who was not in any way implicated or involved in the original spill and clean-up activity) owned the sewer system and the shoreline property at the point of discharge to the Lake. An order had already been issued to the owners of the property where the spill originated. However, the property owners notified the Ministry that their financial means for completing the clean-up had been exhausted. At that juncture, the Ministry issued an order directed only at the City and purely on the basis of the City's ownership of the roadway, sewer system and the shoreline, requiring that the City restore the City-owned lands.

The Tribunal issued its decision on the merits of the appeal in 20103, and held:

The naming of an innocent landowner in appropriate circumstances can contribute to the purpose of the EPA. The Tribunal cannot undermine the EPA's purpose in favour of the outcome sought by the City. This conclusion stems from the proper approach to the exercise of discretion under a public interest statute such as the EPA. In its previous Orders in this proceeding, the Tribunal has already outlined how its approach to the exercise of discretion has evolved since the time when Appletex was decided. The Tribunal is asked to apply the EPA as it stands today in light of the applicable modern legal principles on the purposive exercise of discretion. In the course of doing so, it is proper to consider any applicable policy that is intended to assist in implementing the statute, such as the Compliance Policy. The Tribunal must then reach a conclusion that furthers the purpose of the EPA. This point was made in the Tribunal's previous Orders in this proceeding and remains applicable in this Decision.

Fairness principles were also the appellants' rallying cry in Currie v. Director4, a case involving the imposition of an order on the basis of management and control, rather than on the basis of ownership. In Currie, a contaminated property was owned by a numbered company and operated for resin production. Resin operations ceased in 1994, and the property was later sold and leased to other entities which did not carry on an active business involving resin. An order was issued against the sole living director of the numbered company (Mr. Rickerd), and also against the persons who were directors (Mr. Currie and Mr. Labatt) during the time when the resin business actually operated. While there seemed little dispute that Messrs. Labatt and Currie had management and control of the property at least until 1998, the case on behalf of Mr. Rickerd was that although a director, he did not have management or control of the property to which the order related and was a "passive investor" in the company. The Tribunal however evinced scepticism:

It is difficult to conceive, in light of the time and energy that Mr. Labatt and Mr. Currie spent on addressing MOE concerns, that Mr. Rickerd was unaware or uninformed of the continuing environmental challenges at the Site. As well, Mr. Rickerd's name is on the documents pertaining to the sale of the Site.

The Tribunal concluded that Mr. Rickerd had management and control of the property along with Messrs. Currie and Labatt, and then turned to the question of fairness:

In this matter, the Tribunal must ask whether the fundamental purpose of the EPA will be served if the Appellants are removed from the Director's Order. Although the facts of this case present an unfortunate set of circumstances, the overriding goal is to ensure that the environment is protected, and in this matter, that the groundwater monitoring and containment regime are maintained, wastes are properly categorized and secured and the Site itself remains secured.

While these recent cases fall short of fully overruling previous decisions based on fairness, the emphasis upon the overriding goal of environmental protection places a considerable evidentiary burden on appellants to demonstrate how the results they are seeking will also fulfill the purposes of the legislation.

Footnotes

1. Ontario v. 724597 Ontario Inc. (1994), 13 C.E.L.R. (NS) 257 (EAB); aff'd 18 C.E.L.R. (NS) 137.

2. Environmental Review Tribunal Case No. 09-007, dated November 20, 2009.

3. Environmental Review Tribunal Case No. 09-007, dated July 16, 2010.

4. Environmental Review Tribunal Case No. 10-050 to 10-052, dated June 7, 2011.

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