In a recent decision, the Ontario Court of Justice convicted Sunrise Propane Energy Group Inc. and 1367229 Ontario Inc. (the Companies), and their directors, Shay Ben-Moshe and Valery Belahov (the Directors), of multiple offences under the Ontario Environmental Protection Act (EPA) and Occupational Health and Safety Act (OHSA). The decision in Ontario (Ministry of Labour and Ministry of the Environment) v. Sunrise Propane Energy Group Inc. , 2013 ONCJ 358, suggests that it may not be easy to establish a defence of due diligence to a regulatory offence in the case of an inherently dangerous activity. In such a case, a successful due diligence defence will need to demonstrate that a preventive process is in place to avoid the harm, whether or not it was possible to predict the precise manner in which that harm would come about.
The charges arose out of a series of explosions at the Sunrise Propane facility in the city of Toronto on August 10, 2008, which left one worker dead and required approximately 12,000 residents to evacuate their homes. The explosions started while workers at the Sunrise Propane facility were performing a truck-to-truck transfer of propane. According to the Fire Marshal, a propane leak led to the explosion, likely caused by a hose failure; but the specific source of the ignition was never determined. The Companies were charged under the EPA with discharging contaminants that caused an adverse effect, and both the Companies and Directors were charged with failing to comply with the provincial officer's cleanup order (Order). Charges were also brought under the OHSA.
As the charges brought against the defendants under the EPA and OHSA were strict liability offences, the Crown had an obligation to establish the actus reus (or guilty actions) of the offence, with the burden then shifting to the defence to establish due diligence. Much of the Court's analysis focused on whether the due diligence defence had been made out, but there was also some dispute over the precise actus reus that the Crown needed to establish for some of the offences.
The Companies and the Directors were convicted of all charges, except for one of the five counts that related to their failure to comply with the provincial officer's Order. In making its decision, the Court relied on several agreed statements of facts, as well as extensive evidence provided during 17 days of trial. It is interesting to note that while the specific cause of the explosions was never determined, the Court found liability on the basis that all possible causes were within the control of the defendants.
The Charges Under the EPA
Discharge of a Contaminant
The Companies were charged with violating s. 14 of the EPA, which prohibits discharging or causing or permitting the discharge of a contaminant into the natural environment, if the discharge causes or may cause an adverse effect. "Contaminant" is defined under the EPA as "any solid, liquid, gas, odour, heat, sound, vibration, radiation or combination of any of them resulting directly or indirectly from human activities that causes or may cause an adverse effect."
The Court agreed with the Crown's position that the actus reus for this offence had been proven by the agreed statement of facts, which set out that (a) contaminants (including heat, vibration, sound, gas vapour, smoke and solids such as asbestos, dust, metal fragments and other debris) had been discharged from the facility into the natural environment; and (b) the discharged contaminants caused several adverse effects, including injuries to individuals and damage to property. The insurance policy clearly showed that the Companies were in control of everything that happened at the site, and therefore the Court could conclude that they "caused or permitted" the discharge within the meaning of the Act.
With regard to the defence of due diligence, the Court accepted that foreseeability of the harm was relevant, but that the issue was not whether the defendants could have foreseen the particular event that occurred. Rather, the issue was whether or not the defendants could have foreseen that a propane leak could result in an explosion. The Court determined this was foreseeable.
In assessing whether the defendants had taken reasonable steps to prevent the discharge offence from occurring, the Court noted that the defendants had failed to comply with an Order by the Ontario Technical Standards and Safety Authority (TSSA) prohibiting truck-to-truck transfers of propane and had failed to provide oversight of drivers or put a preventive maintenance system in place. Despite some evidence of a general atmosphere of safety, the Companies were still required to take reasonable steps to address specific deficiencies, particularly those that were pointed out by an inspector.
The Court accepted the defendants' argument that there was some evidence of "officially induced error" – namely, that a TSSA fuel safety inspector permitted non-compliance with the TSSA Order prohibiting truck-to-truck transfers. However, this inducement lasted only a short period of time and was overtaken in June 2007 by a province-wide TSSA Code that forbade the practice.
The Court held that the Companies had not established due diligence in the circumstances, and they were found guilty of contravening s. 14(1) of the EPA.
Provincial Officer's Order
Sunrise Propane was also charged and convicted of four out of five offences in relation to a provincial officer's Order that was issued after the explosions. Each of the Directors was charged and convicted of failing to take all reasonable care to prevent the corporation of which they were Directors from contravening the Order.
As part of the agreed statement of facts, the parties agreed that after the propane explosions, a Ministry of Environment provincial officer issued a provincial officer's Order against the two corporate defendants, requiring them to immediately take a series of steps, including confirming that the Companies were willing to comply with the Order; providing notification if the Companies could not comply with the Order; verifying that a qualified consultant had been hired to carry out the Order; cleaning up the surrounding residential area impacted by the explosion; and providing a written cleanup plan. Separate counts were laid against the companies for their failure to comply with each of these provisions. The Order was never appealed to the Environmental Review Tribunal.
At the outset, the Court noted that an order issued by a provincial officer is presumptively valid. If the defendants wanted to attack the Order, they should have availed themselves of the appeal process provided, under the EPA. The defendants were aware of how to challenge the Order but chose not to do so. As a result of the rule against "collateral attacks" enunciated by the Supreme Court in Consolidated Maybrun,1 the defendants could not challenge any provision of the Order as "unreasonable."
The defendants argued that it was impossible for them to comply with the Order because the deadlines imposed by the Order were too stringent and had already passed by the time they received the Order. However, the Court did not accept this defence, holding that their obligation to comply with the Order was ongoing, and continued even after the expiry of the deadlines.
The argument of the defendants that they relied on mistaken legal advice from their lawyer that the deadlines in the provincial officer's Order could be amended was also rejected by the Court. Ignorance of the law was no excuse.
The argument of the defendants that their lawyer had notified the Ministry that they would not comply with the Order was accepted on the facts. In other words, the defendants proved that they had been duly diligent with respect to this one count. As a result, the defendants were convicted of four of the five counts of failing to comply with the Order.
In addition, the two Directors were convicted of violating s. 194(1) of the EPA – failing as directors of the corporate defendants to take all reasonable care to prevent the corporations from contravening an Order under the EPA.
The Charges Under the OHSA
In addition to the charges under the EPA, Sunrise Propane was also charged and convicted of contravening ss. 25(2)(a) and (h) of the OHSA. In making these determinations, the Court emphasized the importance of preventive processes, particularly in a dangerous workplace (i.e., "a yard filled with propane where a leak would cause explosions"). It did not matter whether the precise mechanism by which the explosions were triggered could not have been predicted. According to the Court's comments, these preventive processes should ensure that (a) employees receive appropriately detailed information, instruction and supervision, which may include a process to obtain assistance when a supervisor is not available on the worksite; and (b) the organization complies with its regulatory requirements and safe industry practices.
The Court determined that Sunrise Propane failed to provide appropriate information, instruction and supervision to Mr. Saini, the deceased worker, regarding the safe work practices and recognition of hazards associated with propane storage, dispensing and handling, and regarding appropriate emergency response to propane leaks. In this case, there was no record of training and none of the three individuals who provided training to employees was able to testify that he had provided training to Mr. Saini. There was some suggestion that Sunrise Propane's records had been destroyed in the fire, but there was no evidence of any kind of ongoing training whatsoever. On the basis of this evidence and the fact that Mr. Saini had run toward the explosion instead of away from it, the Court inferred that Mr. Saini had not received proper information and instruction. The Court also found that Mr. Saini was effectively left in charge of the propane filling station, even though he had little experience and was authorized only to fill up taxis; there was also no procedure in place for him to contact someone for assistance. With regard to the due diligence defence, the Court emphasized that it was not sufficient that Sunrise Propane took safety seriously in general. Given the danger inherent in handling propane, Sunrise Propane was required to establish a high degree of attention to detail, as well as to put in place processes that would address day-to-day issues and mitigate the inevitable mistakes caused by human error.
Sunrise Propane was also charged and convicted of failing to take every reasonable precaution in the circumstances for the protection of a worker by moving two 2,000 USWG2 tanks without proper approval from the TSSA. Although there was no evidence that the movement of the tanks played any role in the explosion, the Court held that this action was highly risky behaviour that may have resulted in a very dangerous situation. The defendants' failure to establish a system to ensure compliance with the requirements of the TSSA contravened their obligation to ensure that the propane facility was installed and operated in accordance with regulatory requirements and safe industry practice.
This is an important decision and could result in significant fines under both statutes.The sentencing hearing is currently scheduled for December 9, 2013. While fines are available, it is unlikely that the Court will be able to impose any jail terms on the Directors, because these appear to be first convictions, which under s. 194(1)(f) of the EPA do not attract a jail term. Furthermore, it is currently uncertain whether the defendants will appeal the verdict.
This case confirms the importance of establishing and documenting a preventive system to comply with obligations under public welfare legislation such as the EPA and OHSA. The more dangerous the activity, the more difficult it will be to establish due diligence, absent such a preventive system. Even if the particular incident could not have been foreseen, or the risk of a particular hazard materializing is small, due diligence will require significant steps to be taken to avoid that harm if there is a large potential for harm.
In addition to these quasi-criminal prosecutions, the Companies and Directors have also been named as defendants in an ongoing class action that was certified on July 23, 20123 which could result in a significant award of damages for the residents and other individuals affected by the 2008 explosions. As the Court in Sunrise Propane noted, residents who were displaced by the explosions suffered lost wages and were forced to pay out-of-pocket expenses for temporary shelter and clothing. Significant structural damage was also caused to two local elementary schools and local businesses.
1 R. v. Consolidated Maybrun Mines Ltd.,  1 S.C.R. 706.
2 United States water gallons, a unit of measurement for liquid propane.
3 Durling v. Sunrise Propane Energy Group Inc., 2012 ONSC 4196.
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