Canada: No Stay For Order To Former Officers And Directors

Last Updated: April 10 2013
Article by Dianne Saxe

The Environmental Review Tribunal has refused to stay a multimillion dollar order to the former officers and directors of a bankrupt company and its parent, pending appeal, whether or not the Ministry of the Environment had jurisdiction to issue the Order. See Baker v. Director, Ministry of the Environment, Case Nos.: 12-158 to 12-169.

What does this mean for officers and directors of companies with past or present operations or properties in Ontario? It means that it is not enough for you to comply with the duties of officers and directors set out in s. 194 of the Environmental Protection Act. If the Ministry issues an order some day, all of your personal assets may be at stake, unless you are well covered with millions of dollars of directors' and officers' insurance, and unless the insurance will continue to cover you after the corporation stops paying premiums and after you leave the board. All of this whether or not your corporation caused the contamination, and whether or not the Ministry had the legal right to issue the Order against you. Until the appeal is decided, you must pay.

The Bankrupt Company

Northstar Aerospace (Canada) was the last owner and occupier of an industrial facility in Cambridge, Ontario. For about half a century, Northstar Canada and its predecessors made metal parts, many of which they degreased with a chlorinated solvent, trichloroethylene. In the early years, it was common practice to dispose of waste chlorinated solvents by pouring them on the ground, where they were believed to disappear.

In 2004, TCE groundwater contamination was discovered. During the next eight years, Northstar Canada spent $15 million to delineate, control and cleanup the contamination, on and off its site. Substantial future remediation costs were also recognized as liabilities on the balance sheet. As of December 31, 2010, the remaining provision for environmental testing and remediation costs was $7.5 million. In 2011, the Ministry's cleanup standards became more stringent.

In 2012, the company received CCAA protection and ultimately declared bankruptcy. The Superior Court of Justice rejected Ministry of the Environment attempts to claim priority over other company assets for cleanup costs at the Cambridge site. The Ministry appealed; the case will be argued before the Court of Appeal next month.

Personal liability of officers and directors

Meanwhile, the Ministry of the Environment ordered the former officers and directors of the bankrupt company, and of its parent company, to personally fund the cleanup, at an estimated cost of $15 million (about $1.25 million per year). The Order does not allege that the officers and directors had any personal involvement in creating the contamination. Nor does it allege that they were officers and directors at the time the TCE was discharged into the natural environment. Instead, it blames them for not setting aside the cost of cleanup into a special trust account before declaring insolvency. The Order does not identify any source from which the company could have obtained the  money, nor how it could have protected the funds from its other creditors. The Order simply says:

2.13 Northstar's publicly released Annual Reports for 2008, 2009 and 2010 estimated that the future cost of the remediation of pollution related to the Site amounted to several million dollars. Nevertheless, the funding of such future work was not secured by Northstar or Northstar Canada through a trust account or other means.

2.20 The Parties are former directors and/or officers of the companies named in the Remediation Order and as such had management and control of those companies. The Parties were directors or officers during the period from approximately 2005 to 2012 during which the results of indoor air sampling were analyzed and mitigation strategy was developed with respect to the Contamination.

2.21 As no provision has been made for the continuation of the investigations, monitoring, mitigation and remediation of the Contamination, the Parties have failed to carry out their duty and exercise their authority as a director/officer to make adequate provision to ensure implementation of the remediation strategy generally and in accordance with the obligations imposed by section 93 of the EPA as well as the Remediation Order. Further, the Parties have caused or permitted the discharge of a Contaminants so that human health or safety is endangered or is likely to be endangered a result of the failure to make adequate provision to ensure implementation of the remediation strategy and compliance with the Remediation Order.

Appeal and request for stay

The former officers and directors appealed the Order to the Environmental Review Tribunal, arguing that the Ministry has no jurisdiction to make the officers and directors vicariously liable for the environmental obligations of their bankrupt company, whose assets have been disposed of by order of the Superior Court of Justice, in accordance with federal insolvency law. They say that they could not have set aside $15 million, prior to insolvency, as the ministry demands, because the company did not have the money.

They also argued that, if they ultimately succeed on the appeal, they will not be able to recover from the Ministry any of the funds they will be forced to spend on the contamination, at a rate of more than $100,000 per month. Instead, they offered to put the entire monthly cost into trust, to guarantee that the Ministry will be able to recover the monthly cost from them should the Ministry win the appeal.

The Ministry rejected the offer, and the Environmental Review Tribunal rejected the directors and officers' motion for a stay pending appeal. According to the Tribunal, the former directors and officers flagrantly defied the statutory scheme in refusing to accept responsibility for the cleanup pending appeal, no matter how unjustified they may believe the Ministry's Order to be:

[94] The Tribunal emphasizes that there is no automatic stay of most orders under the EPA, including this Order. Appellants seeking a discretionary remedy such as a stay should make efforts to comply with the Order pending the determination of their appeals or pending the issuance of an interim stay (a hearing for which can be arranged on short notice) or stay by the Tribunal. The Tribunal notes that, in many situations, the hearing of an interim stay motion or a stay motion will take place before the first deadlines in an order and compliance and conduct issues will not arise.

[95] If the Tribunal were to routinely grant stays to those who simply ignore their statutory obligations, this would amount in practice to a situation where there is an automatic stay pending appeal. The Legislature clearly opted for another approach when it amended the stay provisions of the EPA. The present statutory scheme is one where orderees are required to comply unless a stay is granted. The Tribunal finds that there would be significant harm to the public interest if the Tribunal were to grant a stay in the circumstances of this case. For these reasons, the Tribunal finds that even if the harm to the Appellants were considered to be irreparable or there were no bar to the issuance of a stay for aspects of the Order under s. 143(2), the balance of convenience favours the Director.

 The ERT's refusal to grant the stay has been appealed to the Divisional Court.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Dianne Saxe
Similar Articles
Relevancy Powered by MondaqAI
Willms & Shier Environmental Lawyers LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Willms & Shier Environmental Lawyers LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions