This decision of the Ontario Court of Appeal provides clarity on the liability of industrial polluters for airborne contamination of neighbouring properties and will likely have significant impact on future environmental litigation. The causes of action alleged in this case involved private nuisance and a cause of action founded on the rule in Rylands v. Fletcher, a seminal decision of the House of Lords, which enables a finding of strict liability for damage caused to one property, by the "escape" from another property of a substance "likely to cause mischief," in circumstances where there has been a "non-natural" use of the land.
Inco Limited (Inco) operated a nickel refinery in Port Colborne, ON from 1918 to 1984. During that time, waste product was emitted into the air from a 500-foot smoke stack, mostly in the form of nickel oxide. Nickel oxide was subsequently found in the soil of neighbouring residential properties. Beginning in 2000, 16 years after the refinery had closed; concerns about the level of nickel in the soil began to surface and caused widespread public concern and controversy. A class of approximately 7,000 neighbouring property owners contended, and the trial judge agreed, that the public concern had resulted in their property values not increasing at the same rate as comparable properties. The trial judge awarded $36 million in damages after holding Inco liable in both private nuisance and under the rule in Rylands v. Fletcher.
A unanimous Court of Appeal allowed Inco's appeal and set aside the trial judgement, determining that the claimants had failed to establish Inco's liability under either private nuisance or the rule in Rylands v. Fletcher, and in any event, the claimants had suffered no loss.
The Court of Appeal determined that a chemical change in the content of soil, without more, does not amount to physical damage to property as alleged by the claimants. To succeed in their nuisance claim, the claimants were required to show either that nickel at any level posed a risk, or that the nickel levels present were above the levels at which there was a risk to human health and wellbeing. The evidence had failed to establish either point. With respect to the rule in Rylands v. Fletcher, the Court of Appeal found that Inco's operation of the refinery was not a "non-natural" use of its property. Inco operated the refinery in an industrial part of the city and did not create any risks beyond what would be expected of an industrial operation. Although compliance with environmental and zoning regulations is not a defence to a Rylands v. Fletcher claim, the Court of Appeal clarified that it is an important consideration to be taken into account.
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