With little public debate and virtually no media attention,
several significant legal precedents are expanding the scope and
financial impact of environmental obligations. Two recent court
cases illustrate how the so-called "no-fault" provisions
in Ontario's environmental laws can saddle innocent parties,
both corporate and individual, with millions of dollars of
remediation costs, while a bankruptcy case in Newfoundland is
forcing environmental agencies to pursue these innocent 'deep
pockets' ever more vigorously to fund future cleanup
Case #1: City of Kawartha Lakes
In 2009, the City of Kawartha Lakes was ordered by the Ministry
of the Environment (MOE) to clean up a fuel oil spill it did not
cause. Since then, the municipality has fought a series of legal
battles to correct what it considers "a breach of natural
justice." Kawartha Lakes insists that before imposing a
cleanup Order on an 'innocent party,' the MOE had a duty to
first consider any other persons who may have been at fault for the
spill or the off-site migration of the oil. The MOE maintains it
has the discretion to issue a preventative Order under section
157(1) of the Environmental Protection Act (EPA) to ensure prompt
remediation and minimize any adverse effects without regard to
fault. The Ministry had already issued a remediation Order on the
responsible parties, but they had full expended their available
insurance coverage. Spilled oil had spread onto City property.
Therefore, a second Order could rightfully be issued to the
Kawartha Lakes as the party that "owns or has management and
control of an undertaking or a property," even though it bore
no fault for the original spill. The City's appeal of the
remediation Order was denied by the Environmental Review Tribunal.
The City's further appeal was heard by the Ontario Court of
Appeal on May 1, 2013. The Court dismissed the City's
Case #2: Northstar Aerospace
MOE has issued orders to ensure that the directors and officers
(D&Os) of a bankrupt aerospace company are personally
responsible for a multi-million dollar groundwater cleanup project
around one the firm's former plants in Cambridge, Ontario. On
November 14, 2012, the Ministry issued a Director's Order to
continue remediation work against 13 former D&Os of Northstar
Aerospace (Canada) Inc. and its parent company Northstar Aerospace,
Inc. on the grounds that they had "management or control"
of the contaminated site between 2003 and 2012. However, it is
likely that most or all of the groundwater contamination occurred
prior to the tenure of any of the named D&Os. The outstanding
site monitoring and cleanup is expected to cost some $15 million
over the next 10 years.
In turn, 12 of the former D&Os have appealed the Order to
the Environmental Review Tribunal (ERT) and filed a motion in the
Ontario Superior Court requesting it determine the validity of the
Order under the bankruptcy proceedings. The ERT appeal has yet to
be scheduled, while Superior Court hearing was held April 18, 2013,
and the Court has reserved judgment. In the interim, the former
D&Os must continue to pay the cleanup costs, estimated at
$100,000 per month.
Case #3: AbitibiBowater Inc.
In a closely watched case, the Supreme Court of Canada has ruled
that environmental cleanup orders issued by Newfoundland and
Labrador on AbitibiBowater Inc. do not have priority over other
claims in the bankruptcy queue. The company, which now operates as
Resolute Forest Products Inc., had instituted restructuring
proceedings in 2009. Subsequently, the province filed Ministerial
remediation orders for five Abitibi sites and expropriated three of
the properties. The estimated costs of the cleanup ranged between
$50 and $100 million. The case was heard November 16, 2011, and the
decision dismissing the appeal with costs was released December 7,
While the decision is specific to the particular facts of this
case, we expect that environmental ministries across the country
will be considering the impact of the ruling and will be revising
their enforcement policies (written or informal) accordingly. The
inexorable conclusion is that environmental ministries will be
issuing cleanup orders sooner rather than later, ignoring questions
of causation and fault, looking for 'deep pockets' to pay
the remediation costs, and making claims against both a company and
its directors and officers.
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.
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