Canada: Last Directors Standing: Expanding The Scope Of Directors’ And Officers’ Environmental Liability In The Northstar Aerospace Case

In the recent case of Baker et al. v. Director, Ministry of the Environment, a number of former directors and officers of Northstar Aerospace, Inc. (Northstar) and its parent Northstar Aerospace (Canada) Inc. (Northstar Canada) found themselves as the last line of defence between Ontario Ministry of the Environment (MOE) and a contaminated property located at the site of the now insolvent company's former manufacturing and processing facility in Cambridge, Ontario (Site).

For this group of former Northstar directors and officers, the uncertainty about their personal liability for environmental contamination at the Site ended when the Ontario Environmental Review Tribunal (ERT) accepted the Minutes of Settlement on October 28, 2013 between the directors and the MOE. This settlement involved, among other things, the payment of $4,750,000 to the MOE by the group in exchange for the withdrawal of an MOE order which required them to personally carry out the remediation of the Site.

Under the broad sweep of environmental legislation, it is generally understood that directors and officers are subject to potential liability for the environmental remediation of contaminated sites, particularly where they have had management of or control over contaminants or where they have made decisions that resulted in contamination. However, the Northstar case highlights the willingness of regulators to seek out all potentially responsible parties to recover the costs of remediation where a company is no longer able to continue financing remediation activities, even where the directors and officers did not cause or were not involved in the decision-making that led to the contamination.


The environmental contamination at issue resulted from Northstar's industrial activities at the Site, where the company operated a manufacturing and processing facility for aircraft parts from 1981 to 2009. Trichloroethylene (TCE), a human carcinogen, was used by Northstar in its operations and caused contamination under the Site, which then migrated beneath approximately 652 residential properties within the Bishop Street Community.

Timeline of Events

  • In October 2004, Northstar notified the MOE that it had identified soil and groundwater contamination on the Site which was possibly migrating to adjacent properties. The primary contaminants were identified by Northstar as TCE and hexavalent chromium.
  • In 2005, Northstar further confirmed with the MOE that the contamination had migrated from the Site to the adjacent Bishop Street Community. Under MOE's supervision, Northstar commenced a voluntary remediation plan.
  • In 2008, 2009 and 2010, Northstar released annual reports which estimated the future cost of remediation of the Site in the millions of dollars. However, at no time did it secure the funding for such work in the form of a trust account or other means.
  • On March 15, 2012, amidst growing concern about Northstar's financial difficulties, the MOE issued a remedial order to secure the continued performance of the remediation work.
  • On June 14, 2012 Northstar, Northstar Canadaand two other related companies sought and obtained protection from creditors pursuant to the Companies' Creditors Arrangement Act (CCAA). Subsequently in July 2012, the Ontario Superior Court of Justice approved the sale of substantially all of the operating assets of Northstar and Northstar Canada, other than the Site, leaving no personnel or resources to carry out the remediation work. Substantially all of the proceeds of sale were distributed to Northstar's secured lender.
  • In August 2012, on the basis of human health concerns, the MOE stepped in to continue the remedial work on the Site.
  • On October 21, 2012, when the stay of proceedings under the CCAA proceedings expired, the MOE issued a remediation order against the directors and officers of Northstar on the basis that they were directors and officers from 2004 to 2012 and as such had management and control of the Site and the remediation systems (Order).

Launching an Unsuccessful Appeal

The former directors and officers appealed the Order and brought a motion before the ERT to stay the Order claiming that the they would suffer irreparable harm if the Order was not stayed as they would have to incur remediation costs of approximately $1.4 million per year. In addition, the directors and officers submitted that they could not recover any costs from the insurance policy intended to indemnify former Northstar directors and officers as it excluded environmental remediation costs. The ERT did not grant the stay and it ordered the former directors and officers to immediately pay for the continuation of the requisite remedial work regardless of whether the Order was appealed and until any such appeal process was completed.

On appeal, the directors and officers claimed a range of defenses, including that some of them were not on the board during the time of the contamination and had no specific responsibility for environmental matters. The MOE's view was that the directors had allowed the company to file for CCAA protection and stop remediation activities at the Site, which made them responsible for remediation under the Environmental Protection Act (Ontario).

The defenses were unsuccessful, and liability was imposed immediately resulting in the payment of approximately $800,000 for the completion of interim remedial work until the results of the appeal were determined. The financial burden of having to fund the interim remediation work was likely a key motivator for the former directors and officers to reach a settlement with the MOE.

An Uncertain Path Forward

The Northstar case introduces uncertainty to the role of directors and officers as it relates to their responsibility for environmental contamination. In particular, the Northstar case serves as a cautionary tale for even if the MOE has a weak case, directors and officers may be expected to personally finance significant remediation costs (regardless of whether they had knowledge of, involvement in, or oversight of the work being completed) until the appeal of a remediation order has run its course.

Now that the parties have reached a settlement, it is unclear whether the facts of the Northstar case would have supported the MOE's assertion that the former directors and officers were liable for the remediation of the Site. In another recent case, the Ontario Court of Appeal upheld an MOE order issued against an innocent landowner in Kawartha Lakes (City) v. Ontario (Environment). These cases show the MOE's willingness to seek out and issue orders to all potentially responsible parties in order to recover remediation costs, notwithstanding fault.

Risk Mitigation Strategies

It is too early to tell whether the Northstar case will have a chilling effect on the ability of companies to recruit talented board members for their organizations, and to what extent other provincial regulators will follow the MOE's lead in expanding the scope of director and officer liability for cleaning up environmental contamination, especially where a company runs into financial trouble. For individuals who currently serve on boards or are considering taking up a board position, it is important to ask the right questions, particularly if the company operates in an industry that is at higher risk for environmental contamination. To mitigate the risks of environmental liability not only for directors and officers, but also for companies, the following actions should be considered:

  • reviewing the organization's environmental policies and practices;
  • ensuring sufficient protection for directors and officers in indemnity agreements;
  • determining whether insurance policies cover environmental remediation liability and if not, acquiring such coverage if the company conducts high risk activities;
  • establishing a fund or setting aside money in a trust that is dedicated to covering any potential environmental costs;
  • regularly consulting with the company's environmental managers to address any issues of concern and ensuring that issues are reported to senior management in a timely way;
  • ensuring that employees are aware of their responsibilities to comply with requirements under environmental legislation (e.g., spill reporting obligations);
  • ensuring that remedial and preventative measures are in place to respond to environmental incidents; and
  • ensuring that environmental audits are carried out at regular intervals.

In the aftermath of the Northstar case, it is more important than ever for directors and officers to manage environmental issues proactively and implement policies to help minimize their risk exposure. This will go a long way in ensuring that directors, officers and their companies are able to manage and respond appropriately to risks arising from constantly evolving environmental liabilities.

To view original article, please click here

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.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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