An application for leave to appeal to the Supreme Court of Canada ("SCC") has been filed in the Inco case by Port Colborne, Ontario property owners. After initially being awarded $36 million for diminished property values due to nickel deposits in their soils, the claimants' win was reversed late last year by the Ontario Court of Appeal1.
The SCC leave application raises several issues said to be of public importance including:
1. What is the threshold for nuisance liability in the context of environmental contamination? In particular, is stigma a recognizable head of damage to land under Canadian law?
2. How should common law nuisance liability be considered in relation to statutory standards for contamination?
A key question before the SCC is the level at which chemical airborne emissions, leading to soil depositions, become actionable by a property owner. Does there need to be a risk to human health? Is interference with property use necessary?
Property Owners Won at Trial
Property owners' soils in Port Colborne contain nickel particles after years of emissions from Inco's nickel refinery, ending in 1984.
The Ministry of Environment ("MOE") guidelines re nickel in the late 1990s were 200 parts per million (ppm) based on levels at which deposits could conceivably affect the most sensitive plant life. A 1998 MOE report based on 1991 samplings showed some properties significantly exceeded the guideline levels but MOE reported it was unlikely those nickel levels posed any risk to human health.
In March 2002, MOE released more test results showing some nickel levels higher than previously reported. Inco was ordered to remediate 25 properties where soil samples yielded nickel levels above 8,000 ppm, an intervention level said to have been developed to ensure all nickel exposures did not exceed a value that is "well below any potential health risk".
Increased publicity raised concerns in the community about nickel levels. At trial, the adverse publicity was alleged to have affected appreciation in land values.
The trial judge held Inco liable in nuisance and under Rylands v. Fletcher strict liability principles for that loss. Damages were assessed at $36 million. Seven thousand potential claimants were assigned to damages recovery pools.
The award was made despite the fact there is no allegation Inco operated the refinery unlawfully or negligently; Inco apparently complied with all environmental and regulatory schemes. Historical emission levels did not contravene regulations. Nor did the plaintiffs allege that the presence of nickel on their properties posed any threat to human health or any adverse impact on the use of the properties. The core claim quite simply is that property values had not increased at the same rate as comparable properties in other small cities nearby.
Based on conflicting expert evidence, the trial judge held that comparable properties in Welland Ontario had increased in value 4.35% more than Port Colborne properties during a ten-year period from 1999 to 2008. The difference yielded an average loss of $4,514 per property, resulting in the overall damages award of $36 million.
Court of Appeal Overturns Award
Inco's appeal was allowed. The property owners' action was dismissed by the Court of Appeal. Inco was found to be liable neither under private nuisance nor the rule in Rylands v. Fletcher. And even if elements of either cause of action had been established, the appeal court held that claimants had failed to prove any damages.
The Court of Appeal said that the trial judge erred in finding that the nickel particles in soil caused "actual, substantial, physical" damage to the claimants' lands. Mere chemical alteration in the content of soil, without more, does not amount to compensable physical harm or damage to the property.
This central finding is the one claimants now seek to have reviewed and overturned by the SCC.
SCC Leave Decision Expected by June 2012
Even if the SCC hears the case and accepts the core argument, the claimants face other significant hurdles including limitation period questions raised but not resolved by the Court of Appeal and damage assessment issues. The Court of Appeal, for example, had serious reservations about the expert methodologies used to determine whether the nickel had any impact at all on property values.
The SCC's decision on the leave application is expected be released by June 2012.
Footnote
1. Smith v. Inco Limited (2011), 107 O.R. (3d) 321 (C.A.); 2011 ONCA 628.
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