In a 3‐0 decision, the Ontario Divisional Court has upheld the reasoning of the Environmental Review Tribunal (the "ERT" or "Tribunal") that innocent landowners can be forced to clean up pollution on their property caused by others. The Ministry of the Environment ("MOE") had ordered the City of Kawartha Lakes (the "City") to clean up municipal property contaminated by a nearby homeowner's furnace oil spill when the owners were unable to complete the remediation.
In upholding the MOE clean‐up order, both the ERT and the Divisional Court stated that the purpose of the Environmental Protection Act ("EPA") was to protect the natural environment, even at the expense of burdening innocent land owners with clean‐up costs. The "fairness factors" from the 1995 Appletex decision1 that could relieve innocent land owners of liability were not applicable when there was no other party to remove the threat to the natural environment.
This is the first decision in years to burden an innocent landowner with a large clean‐up cost. With a Divisional Court decision supporting a reduced role for fairness, it is likely that the MOE will continue the practice of pursuing this recourse against innocent parties in the future.
Several hundred litres of furnace oil leaked from the basement of a private home and contaminated the City's sewers and the shoreline of Sturgeon Lake. The MOE ordered the homeowners to clean up the spill. The homeowner's insurance company started the remediation but the insurance policy was exhausted before the City's property could be cleaned‐up.
Since the homeowners did not have the means to complete the remaining clean‐up, the MOE issued a s. 157.1 provincial officer's order that required the City to remediate the remaining contamination on its property (i.e. the municipal sewers and the shoreline of Sturgeon Lake). The provincial officer's order was confirmed by an MOE Director.
Environmental Review Tribunal Decision
The City appealed the clean‐up order on the grounds that it was an innocent party and that, in accordance with the "polluter pays" principle, the order should be issued to those at fault. The ERT disagreed. In supporting the position of the MOE, the Tribunal reasoned that the overriding purpose of the EPA was the conservation and protection of the natural environment and that any consideration of fairness could impede a quick response to address environmental damage.
While s. 157.1 of the EPA was silent on fault, the MOE's Compliance Policy was clear that if multiple parties could be named in a s. 157.1 order, the provincial officer should not attempt to apportion liability between the different parties. Each party is jointly and severally liable to carry out the order and any apportionment of liability could be addressed through the civil courts or a proceeding under s. 99 of the EPA to recover the costs of clean‐up from the polluter. Current owners, innocent or not, should be named in an order. If there are exceptional circumstances, the timing or content of the work in the order may be adjusted but the order should still be issued in the first place. The only reason for not naming the current owners in an order would be if it would serve no environmental purpose.
While the ERT will look to see if parties are properly named and that orders are within the scope of the EPA, issues of apportionment of liability are not relevant to the ERT's decision to uphold or quash an order unless it would increase the likelihood that the environmental measures would be carried out. The ERT will not revoke a jurisdictionally and environmentally sound order (however unfair) without addressing how the overriding environmental protection purpose of the EPA would be met.
Divisional Court Decision
On appeal to the Divisional Court, the City made two arguments:
1. The ERT should not have been prevented from leading evidence of who was at fault, and;
The Divisional Court rejected both arguments, upheld the decision of the ERT and found that the MOE had acted reasonably. While the MOE Director may take "fairness factors" into account in deciding whether or not to issue an order under s. 157.1 of the EPA, the Director is not required to do so. The ERT was not required to consider evidence of fault. While fault is not entirely irrelevant, it need only be considered as stated in the Compliance Policy. Fairness considerations may influence the timing or content of an order, not the decision to issue it in the first place.
The Divisional Court found that s. 157.1 of the EPA does not create a "polluter pays" principle that would relieve the City of liability. Rather, the Legislature has enacted an "owner pays" mechanism that makes no reference to fairness or fault. The City had not demonstrated how arguments about fairness would assist the ERT in its overriding mandate of protecting the natural environment.
The Divisional Court decision affirms the ERT's holding that landowners can be held responsible to remediate their property even if the pollution was caused by others. "Fairness" is now a secondary concern to the overriding EPA purpose of the protection of the natural environment. Innocent parties faced with MOE clean‐up orders should try to propose options (where possible) that not only result in a fairer outcome but are as protective of the natural environment.
To reduce the risk of being burdened with another party's clean‐up costs, property owners need to pay attention both to contamination on their lands and to any potential contamination in the vicinity of their lands. Vendors should consider the creditworthiness of purchasers that have indemnified the vendors against future environmental liability. If the purchaser is insolvent, the MOE could look to the vendor to remediate the contamination. In this respect, vendors could be forced to pay twice: first through a discounted purchase price because of on‐site contamination and second through MOE clean‐up orders. Purchasers need to continue to exercise due diligence to avoid inheriting unexpected environmental liabilities.
1 Re 724597 Ontario Ltd. (1994), 13 C.E.L.R. (N.S.) 257 (Ont. Env. App. Bd.), affirmed (1995), 26 O.R. (3d) 423 (Div. Ct.).
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