Canada: Baker v. Director, MOE: Pouncing On Convenient Victims

Last Updated: March 20 2014

Article by Barry Weintraub1

The case of Baker et al. v. Director, Ministry of the Environment2 is a dramatic example of the potential for abuse that is inherent in the excessively broad powers given to the Ministry of the Environment by the Environmental Protection Act (Ontario).

The case involves Trichloroethylene (TCE) contamination of a property on Bishop Street in Cambridge, Ontario owned by Northstar Aerospace Canada Inc. ("Northstar Canada"), now a bankrupt company.

The Cambridge site had a long history of industrial uses and there was evidence of TCE contamination at the site dating back to the 1970s, prior to the company's existence.

The Ministry of the Environment of Ontario was aware of TCE contamination at the site as early as 1993, and suggested that the site be investigated, but neither the MOE nor the company followed up.

In 2004, Northstar Canada did carry out an investigation of environmental conditions and discovered TCE contamination in the groundwater under the site, which contamination had migrated offsite to affect numerous homeowners in the Bishop Street community.

Northstar Canada then embarked, voluntarily, on an expensive cleanup program involving a pump and treat system to prevent further migration of contaminants from the site and soil vapour extraction to mitigate the risks to residents from TCE in the groundwater.

The Northstar Canada remediation was widely praised in the community as an example of good corporate citizenship, including by the Ministry of the Environment.

Northstar Canada was a subsidiary of Northstar Aerospace Inc., a public company based in Chicago. Northstar Aerospace Inc. had other subsidiaries which had facilities in various locations in the United States. The Northstar companies' business was the manufacture of transmission parts for military helicopters.

Northstar Canada expanded its capacity in the immediate aftermath of 9/11 (the terrorist attacks on the World Trade Center in New York of September 11, 2001) in light of demand by its main customers who supplied helicopters to the U.S. military, primed by the wars in Afghanistan and Iraq.

The Northstar companies began to experience financial difficulties in the latter half of the decade, as a result of the deferral of delivery of helicopters as the war effort waned, a fixed price contract structure with Northstar Canada's main customer Boeing and the weight of the remediation effort.

In 2009, the Cambridge plant was closed down, in favour of Northstar Canada's new facility in Milton, Ontario, but the Cambridge remediation program continued.

In September 2009, new investors were sought, and Neil Baker became a significant shareholder and was asked to sit on the board of directors of Northstar Aerospace Inc.

From 2009 until the eventual bankruptcy of Northstar Canada in August 2012, the company was in financial difficulty. It was more often than not in breach of its bank covenants, and cash was in short supply.

The Ministry of the Environment was aware of the company's financial situation, as it considered and discussed with the company the possibility of requiring financial assurance to be posted, but did not require financial assurance because Northstar Canada had no ability to provide it, and a financial assurance order would have bankrupted the company.

Despite its financial difficulties, however, Northstar Canada continued to carry out the remediation project, with the support (including financial support) of Northstar Aerospace Inc.'s board and management. The Ministry of the Environment remained satisfied with the Northstar Canada remediation throughout.

In early 2012, Northstar Aerospace Inc. issued a warning in its consolidated financial statements that the company was in a grave financial situation.

The Ministry of the Environment became very concerned about the completion of the remediation program, and in April 2012 issued orders to Northstar Canada and Northstar Aerospace Inc. to continue and complete the remediation.

In June, 2012, the MOE issued an order requiring over $10 million of financial assurance to be posted. Two weeks later, Northstar Canada sought protection from its creditors under the CCAA and Northstar Aerospace Inc. sought Chapter 11 bankruptcy protection in the United States. All the directors and officers resigned in favour of the court appointed monitor (and subsequently the Trustee in bankruptcy)

The MOE sought priority for the obligations under the cleanup orders issued, but was unsuccessful, the Court ruling that the only priority to which the MOE was entitled under the relevant legislation was to the extent of the value of the real property affected.

The MOE also sought to access funds that had been set aside to indemnify directors and officers for their obligations, but was turned down, with the Court ruling that directors' and officers' indemnities did not cover remediation obligations.

Ultimately, Northstar Canada became bankrupt, in August 2012. The business was sold as a going concern, but the funds were not even sufficient to pay all the debt owed to the secured creditors. No one was willing to purchase the old Cambridge site of Northstar Canada.

The remediation which Northstar Canada had been carrying on since 2005 continued right up until the bankruptcy of the company. Immediately after the bankruptcy, the Minister of the Environment issued to the MOE an order to carry out the remediation work until such time as a responsible person or persons could be found to assume the responsibility, and thus in August 2012 the MOE took over paying for the remediation work which continued to be carried out by the same consulting team that had been doing so up to that time.

In November, 2012, the Ministry of the Environment issued an order directed to each of the former directors and officers of Northstar Canada and Northstar Aerospace Inc. personally to continue and complete (i.e., pay for) the remediation. The order was issued under various sections of the EPA, including sections 17, 18 and 93.

Section 17 of the EPA provides that remedial orders can be issued against anyone who causes or permits the discharge of a contaminant into the natural environment. Section 18 authorizes a preventive order to be issued to anyone who has or had ownership, management or control of a property or undertaking.

The former officers and directors immediately appealed, in so doing requesting the Environmental Review Tribunal to schedule a motion immediately to stay the MOE order, while simultaneously seeking to have the Superior Court (Commercial List) assume jurisdiction over the matter. The Tribunal did not even acknowledge the appeal until 19 days later, at which time the presiding tribunal members ruled that an interim stay was moot, and a stay motion was scheduled for early February 2013. The ERT ruled against staying the order, with the result that the former officers and directors were compelled to pay for the remediation (at an approximate cost of $150,000 per month) while the appeal of the order was sorted out, with no effective means to recover the funds spent. The Tribunal held that the ongoing monitoring of groundwater results was not eligible for a stay, and with regard to the remainder of the work ordered it refused to grant a stay because the former directors and officers had not yet taken over paying for the remediation when the stay motion was heard.

The Superior Court (Commercial List) declined to exercise jurisdiction over the order, deferring to the Environmental Review Tribunal.3 The ERT scheduled a hearing to commence in late October, 2013. Throughout the intervening months, there were numerous legal proceedings, including motions for particulars, additional productions and relating to the order of presentation at the hearing, and witness statements were exchanged. Before the hearing could proceed, however, a settlement was reached whereby the former officers and directors paid $4.75 million toward the future remediation costs (which were estimated anywhere from $15 million to $60 million.

The basis of the MOE order was never made entirely clear. As mentioned, the Order was originally issued under sections 17, 18 and 93 of the EPA. However, with respect to section 93 (orders with respect to spills), in the midst of proceedings, several months after the MOE Director issued the Order under that section, the MOE's counsel admitted there was no basis for an order under section 93.

Section 17 of the EPA, entitled "Remedial Orders", allows a Ministry of the Environment Director under the Act (an "MOE Director") to issue cleanup orders to any person who causes or permits the discharge of a contaminant into the natural environment so that damage occurs or is likely. These orders require certain individuals to undertake work to repair and prevent the damage caused.

The only discharge referred to in the MOE Director's Order was a spill of chromium oxide in 1994. However, the MOE Director subsequently admitted that this spill had been cleaned up effectively, and unchallenged expert evidence established that it had very little relation to the TCE contamination that was the subject matter of the MOE Director's Order. Thus, there was no "discharge" upon which an order could have been based, unless the MOE sought to disregard the Northern Wood Preservers4case which established that the migration of contaminants within the natural environment was not a discharge into the natural environment.

Section 18 of the EPA, the "preventive orders" power, empowers an MOE Director under the Act to issue a preventive order to any person "who owns or owned or who has or had management and control of an undertaking or property".

The grounds for issuing the order are set out in section 18(2) and provide that such a preventive order can be issued

"... if the MOE Director is of the opinion, on reasonable and probable grounds, that the requirements specified in the order are necessary or advisable so as,

  1. to prevent or reduce the risk of a discharge of a contaminant into the natural environment from the undertaking or property; or
  2. to prevent, decrease or eliminate an adverse effect that may result from,

    1. the discharge of a contaminant from the undertaking, or
    2. the presence or discharge of a contaminant in, on or under the property. 2005, c. 12, s. 1 (10)."

Ultimately, the Baker v. Director, MOE case in the absence of a settlement would have been determined under this section. In the MOE Director's Order, she alleged that as officers and directors each of the individuals to whom the Order was directed as such had management or control of an undertaking or property and were therefore liable to be issued the order because the MOE Director was of the opinion that the work was necessary or advisable.

In so alleging, the MOE Director relied upon several decisions of the Environmental Review Tribunal which established a rebuttable presumption that directors have management or control of a corporation. These cases include Caltex Petroleum Inc. v. Ontario5, General Chemical Canada Ltd. v. Director, MOE6and Currie v. Director, MOE.7 The presumption can be rebutted by an individual proving that he or she did not exercise the requisite degree of management or control.

This policy penalizes with liability those directors and officers who do not cause any problems but who act as responsible corporate directors and officers and do everything they possibly can to prevent further contamination but are unable to do so. It rewards directors and officers who do not act responsibly by putting them in a better position to avoid liability than those directors and officers who perform their jobs diligently. On the ERT's presumption of management or control, a director can avoid s. 18 liability by doing absolutely nothing as a director, whereas directors who make appropriate inquiries and obtain knowledge are more likely to be held liable as persons in management or control. This "tribunal-made law" is bad policy.

All of the cases where this presumption was developed were cases involving small, closely held corporations where directors took an active day-to-day role in the management of the companies, and in most cases where liability was imposed they bore some personal responsibility for the harm that was required to be prevented. Accordingly, the outcomes of those cases may well be understandable and correct on the facts of the cases at bar. However, there is good reason for the Environmental Review Tribunal to rethink its presumption that directors are in management or control of a property or undertaking of a corporation. Such a presumption may work as a means of shifting the onus of proof of control. It may also be correct more often than not in small, closely held corporations. However, in application to large public companies and as a general rule, the notion that directors of a corporation as such are in management or control of a property or undertaking of the corporation is an unwarranted leap in logic that is contrary to basic principles of good corporate governance and corporate law with regard to the role of directors in issue, and misunderstands the primary function of directors. In Baker v. Director, MOE, an expert report was filed by Prof. Poonam Puri, a noted expert in principles of good corporate governance and the role of directors8, which made clear that the role of directors in large public companies was to provide overall strategic direction for a corporation and not to manage its affairs on a daily basis.

The only "fault" that the MOE Director alleged on the part of the former Northstar directors and officers is that they failed to set aside adequate funds to ensure the completion of the remediation. However, expert evidence of PricewaterhouseCoopers opined that Northstar did not have the ability to set aside the necessary funds due to its financial difficulties. Furthermore, to have done so would have been a preference and would have been open to attack by other creditors. As Prof. Puri pointed out in her report, one of the important functions of directors of a corporation in financial difficulties is to manage the competing demands on a corporation's resources. Where there is not enough money to fulfill all these demands, it is not appropriate to hold directors personally liable for the lack of funds.

Directors may often be significant shareholders of corporations, but their function as directors is not to provide financing for the corporation, but rather to provide strategic guidance and direction. The imposition of personal liability on directors as a means of spurring corporations into better action is overly harsh and punitive.

Section 194 of the EPA sets out duties of directors and officers, requiring them to "take all reasonable care" to ensure their corporation does not (a) discharge or cause or permit discharges of contaminants, (b) fail to report discharges and (e) fail to comply with orders. Non-compliance with this duty is an offence.

In a similar fashion, the Ontario Business Corporations Act exempts directors from liability if they exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, including reliance in good faith on the report or advice of an officer of the corporation.

However, the MOE in Baker v. Director, MOE attempted to use section 18 of the EPA to expand directors' obligations beyond those imposed by the legislature in s. 194 to include a personal duty to ensure that corporations have funds to pay for remediation of contamination. It is suggested that such an approach is not good public policy, and will make it virtually impossible for directors to carry out their role to manage competing demands for corporate resources. At the very least, directors and officers should not be liable under section 18 if they exercise all reasonable care. However, the MOE maintains that section 18 is not subject to an "all reasonable care" or similar standard.

The former officers and directors of Northstar Canada and Northstar Aerospace were not all in the same situation. In fact, the tenure and involvement of each of the individuals was unique. Some had been directors for a very long time, dating back to the 1980s, while others were new; some had been both directors and officers, while some held only one role; some had significant equity stake in the business and some did not. Yet the MOE included them all in the MOE Director's Order without differentiation. The MOE did not even look into the individual circumstances of the orderees, and did not consider the tenures of the individual orderees in issuing this order compelling liability for as much as $60 million. It is unclear whether this was a deliberate abuse of authority or merely negligence.

One of the orderees was Wayne Shaw, a lawyer at Stikeman Elliott who served as corporate secretary of Northstar Canada for several years in order to facilitate board resolutions. Despite clearly playing no role in managing the property or undertaking of the corporation, the MOE Director included him in the order as someone who had "management or control of the property or undertaking" of the corporation.

Neil Baker had no involvement in the business whatsoever before 2009, long after any contamination occurred. In fact, the Cambridge plant had already closed when he became involved. Moreover, Mr. Baker was only a director of the U.S. parent company Northstar Aerospace Inc. and was neither a director nor an officer of Northstar Canada at any time. Notwithstanding these circumstances, the MOE included him as an orderee along with all the others.

Given that the Cambridge plant of Northstar Canada had closed when Mr. Baker became a director of Northstar Aerospace Inc., it raises the question as to what "property or undertaking" the MOE alleges he managed or controlled.

The wording of section 18 of the Act does not explicitly require that the property or undertaking managed or controlled by the person be in any way connected to the environmental harm to be prevented by the order. It provides as follows:

"The Director, in the circumstances mentioned in subsection (2), by a written order may require a person who owns or owned or who has or had management or control of an undertaking or property to do any one or more of the following..."

Consider the following example: the plant manager of a company's North Bay plant (who clearly manages or controls the North Bay property or undertaking of the company) is as a result liable for a preventive order in connection with the burial of toxic waste at the same company's Windsor, Ontario location, even if he or she has never even set foot on the Windsor property. In fact, a narrow literal reading of the language of the section could be used to order anyone who manages or controls any property or undertaking anywhere to be liable for a preventive order in connection with contamination at a location totally foreign to the person. Anyone who has ever sold a residential property, if the wording of this section is to be read literally, remains forever open to potential liability to a preventive order if some future owner creates a risk of contamination that must be prevented, even if the former owner is totally unconnected with the creation of the risk of harm.

All of these examples are of course absurd. Most right-thinking people would not believe that the Ministry of the Environment would seek to impose liability on totally innocent persons. They would be wrong. Imposing liability on totally innocent persons is precisely what the Ministry of the Environment sought to do to Mr. Baker and Mr. Shaw, inter alia.

The wording of section 18 is clearly inadequate. Interestingly, other sections in the Act already include language which ties liability to the some measure of control over the contaminant in issue. Part X of the Act, commonly known as the "Spills Bill", provides order powers to the Ministry in circumstances of a spill as defined in that part. It contains broad order powers to deal with a spill, including the power in section 97(1) to issue an order to any person "whose assistance is necessary, in the opinion of the Minister, to prevent, eliminate or ameliorate the adverse effects or to restore the natural environment." This order power applies to any person regardless of whether they have any connection whatsoever to a site. However, the definitions in section 91 limit its application by defining terms similar to those used in section 18 in a narrower fashion than does section 18. In particular, the terms "owner of a pollutant" and "person having control of a pollutant" are defined in section 91 of the Act to have reference to the owner and person having control "immediately before the first discharge of a pollutant." This protection is missing from section 18, leaving section 18 with much broader application.

Successive legislatures of Ontario have let this sloppy wording of section 18 persist. The MOE Director's Order in issue in the Baker case shows that the Ministry of the Environment cannot be trusted to interpret it sensibly.

Court and ERT decisions repeatedly refer to the presumed intention of the legislature to give the MOE broad powers. While it is undoubtedly true that there was an intention to give the MOE broad powers, that does not mean that the MOE was given carte blanche to impose liability on innocent persons.

The MOE now claims that section 18 was intended to be a "no-fault" provision imposing liability, irrespective of innocence or responsibility, and that a director's due diligence is irrelevant. However, such an interpretation misstates history.

History of s. 18

Original intent on enactment

The provision in the EPA allowing for the Director to order preventive measures, which is now s. 18, evolved over time from a more basic provision. Under the 1971 EPA, the Director had broad powers to order remediation of environmental damage (see above), but was limited to ordering the following, as per s. 18:

18. When, in the opinion of the Director, based upon reasonable and probable grounds, it is necessary or advisable for the protection or the conservation of the natural environment to do so, the Director may, by an order directed to any person, require that person to have on hand and available at all times such equipment and materials as the order specifies to alleviate the effect of any contamination of the natural environment that may be caused or permitted by the person to whom the order is directed.

S.O. 1971, c.86, s. 15

Note that the provision only requires that the person have on hand "materials" specified by the order to mitigate damage in the event of contamination. It does not give the director the ability to order the person to develop or implement a plan as does the current legislation.

The provision was commented on briefly in a committee of the entire House after its second reading, on July 27, 1971. MPP Jackson asked for an example of the type of situation in which the Minister anticipated making an order under s. 18 (at the time of the debate, s. 19, and in the final 1971 Act, s. 17). The Minister responded:

Mr. Chairman, I think, for example, oil spills would be an example of that. There are other types of operations where you could have an emergency situation, and we know by the very nature of the operation that plant or business that there is that type of danger.

The director may order that the company to have certain equipment on hand at all times so that in the event there is contamination it can be prevented or at least controlled (5034).

Powers were gradually added to this provision to increase the preventive powers of the Director. As a result of the 1983 amendments (S.O. 1983, c. 52, s. 6), in addition to the existing power to order that specific equipment or material be present, the Director was given authority to order that the person implement procedures specified in the order, construct or install devices, and take steps to ensure that procedures specified will be implemented in the event that a contaminant is discharged.

1983 Amendments to the EPA

The 1983 Amendment repealed s. 18 (then s. 17), and replaced it with wording more similar to the present provision. This is the first time the wording "may require a person who owns or who has management or control of the property..." appears, replacing the more general wording of "any person". Furthermore, the Director was empowered to order that the installation of specific facilities or equipment, implementation of procedures, and that all steps necessary to the implementation of those procedures be taken.

1990 Amendments to the EPA

In the 1990 amendments to the EPA, the words "owned or who has had [ownership and control]" were added to s. 18 (which until R.S.O 1990 was s. 17).9 An excerpt from the compendium tabled with the Bill is set out below:

picture a

The second reading of this amendment occurred on June 19, 1990. While summarizing the amendments, MPP Adams noted as follows:

They allow a swifter, more effective way of dealing with environmental emergency situations that require immediate environmental abatement; they allow effective abatement and cleanup measures to pre-empt potential environmental emergencies, and they allow better approaches to cleanup, cost recovery and convicting and penalizing pollution offenders...The ministry could also apply and enforce orders against any prior owners of a property who may ultimately be accountable for an environmental hazard.

Hansard and the legislative compendium further indicate that the impetus for the amendment was to respond to a fire at Tyre King Recycling in Hagersville, Ontario.10 The compendium, at "Introduction to the 1990 Amendments" (page 1), specifically states that the amendment is in response to the Tyre King/Hagersville Fire. In 1987, the owner had been ordered to separate the tires on the property and install a water reservoir to combat potential fires. Appeals proceeded, during which time the order was stayed. The control order was upheld by the EAB in 1989, but the owner Ed Straza appealed to Divisional Court. During this time the Ministry failed to request that the stay be lifted. It is notable that a portion of the tires on the property were deposited there by a previous owner, from whom Mr. Straza bought the property in 1977. The Order from 1987 was against Mr. Straza and Tyre King only, and not against the previous owner, Aaron Nahernay.11

The Tyre King incident is obviously relevant to the changes made to the right to stay an order pending appeal, as well as changes which appear to have been made to the fire code in 1990. It also no doubt prompted the addition of past tense language as to the subject persons of orders under s. 18. Under the 1990 language, it would have been possible to make an order against both Straza and Nahernay (the former owner), which would have increased the Ministry's chances of recovering the costs associated with the fire.

2004 amendments to the EPA

The power to require the development and implementation of a plan under 18(1)7 was added in the 2004 amendments. The legislative compendium, tabled with the 2004 amendments, states the following on page 4: "[the section 18 amendments] would enable the Director to issue an order to a responsible person to prevent, decrease or eliminate the adverse effects that results or may result from the presence or discharge of a contaminant."

On first reading, the Hon. Leona Dombrowsky (Minister of the Environment) said as follows:

Company officials would be held more liable under the proposed legislation. It would put the onus on corporate directors and officers to prove that they took all reasonable steps to comply with environmental requirements. If convicted, they could face jail time of up to five years.

The compendia describe the Director making an order against "a responsible person" (in the 2004 compendium) or "anyone responsible for the problem" (in the 1990 compendium). This language suggests that s. 18 was intended by the legislature to incorporate a notion of fault. The language of the 1990 comment is more specific that the Director would be making orders against any person responsible for the problem, which by implication can be contrasted with persons who are merely responsible for the property, or for operations taking place on the property. The Ministry statement during the 1990 second reading that, "The ministry could also apply and enforce orders against any prior owners of a property who may ultimately be accountable for an environmental hazard" also suggests a sense that the amendment was meant to include pasttense owners/controllers at fault for the pollution and not to capture those without any "moral" responsibility for the pollution.

Clearly, the focus of these amendments was to make liable those morally responsible for a discharge, and the intention was to excuse from liability those who took reasonable care.

The time has come to fix the wording of section 18 to make clear that liability must be tied to fault of some sort. The "polluter pays principle" is a key policy underlying environmental law. This principle has been recognized, articulated and defined in several judicial decisions, and is the underpinning for environmental law in Canada (and elsewhere). However, the MOE's actions in the Baker v. Director, MOE case and the decisions in the Kawartha Lakes12 case may signal a desire to abandon this principle. That would be unfortunate. In the Kawartha Lakes case, evidence of liability of others, blameworthiness, and fairness was not even considered by the Environmental Review Tribunal, and the Ontario Court of Appeal upheld the decision. The decision to impose liability on Kawartha Lakes may or may not be justifiable. While it was innocent of causing the contamination, it did stand to benefit from its the cleanup activities. Regardless, though, the failure of the environmental legal regime to consider fairness brings the administration of environmental justice into disrepute. Any legal regime which ignores fairness will not be able to last in the long run, as injustice does not serve the public interest.

It has been said that these cases, as well as the Abitibi-Bowater v. Newfoundland13 bankruptcy case, deal with issues where the polluter pays principle is not applicable because no polluter can be found who is capable of paying.

The issue of who should be responsible to pay for the remediation of contamination where no polluter capable of paying can be identified is an important social issue, with broad ramifications for the environment and the economy of the province at present and in the future.

Court decisions under the federal bankruptcy regime, including the Supreme Court of Canada decision in Abitibi-Bowater v. Newfoundland, have made it clear that in most cases liability for the cleanup of contaminated sites will be an unsecured claim against the estate of bankrupt owners, with remedial costs having priority only to the extent there is any value in the contaminated land or any adjacent property, which is unlikely given their contaminated state. The only priority granted to the Crown is a secured charge on the contaminanted land, or adacent property – see s. 11.8(8) of the CCAA. Section 11.8(8) states: "(8) Any claim by Her Majesty in right of Canada or a province against a debtor company in respect of which proceedings have been commenced under this Act for costs of remedying any environmental condition or environmental damage affecting real property of the company is secured by a charge on the real property and on any other real property of the company that is contiguous thereto and that is related to the activity that caused the environmental condition or environmental damage, and the charge (a) is enforceable in accordance with the law of the jurisdiction in which the real property is located, in the same way as a mortgage, hypothec or other security on real property; and (b) ranks above any other claim, right or charge against the property, notwithstanding any other provision of this Act or anything in any other federal or provincial law."

This has placed the Ontario Government and the Ministry of the Environment in a difficult situation when there is no responsible party left to deal with significant contamination issues affecting the real property of the bankrupt property-owner, and neighbouring properties.

In response, the Ministry of the Environment has undertaken to impose liability on those who do not own the contaminated properties, including parties uninvolved in and not responsible for any contamination, in a search for parties who are able to pay for this contamination.

The Province of Ontario does not have a reasonable policy for how to address contaminated sites where no polluting parties are available or able to fulfill an order under the EPA, such as in the case of a bankruptcy. Making innocent individuals pay is not the answer.

While opinions differ regarding when an officer, director or an employee might or might not be be morally culpable for pollution or contamination, there is no question that the EPA as currently interpreted by the MOE and the Environmental Review Tribunal permits the MOE to attach liability to an individual officer, director or employee who is not morally culpable. It would be unfair to continue to force individuals to bear this burden, especially where they did not contribute to, cause or permit the contamination in question.

As noted in an expert report by Dr. Sherry Cooper14 in the Baker v. MOE case, the imposition of liability on directors who have done nothing wrong will cause substantial harm to the economy of Ontario, by discouraging people from becoming directors of corporations and discouraging investment in the province.

What is currently in place encourages attaching liability under section 18 of the EPA to those who are simply available and have the resources to remediate rather than those who are morally culpable for the pollution. This is inconsistent with the polluter pays principle, and general principles of the law.

In R. v. City of Sault Ste. Marie,15 the Supreme Court of Canada said that if an individual could be held liable for pollution that he or she had no control over, "the law is engaged, not in punishing thoughtlessness or inefficiency, and thereby promoting the welfare of the community, but in pouncing on the most convenient victim."

Those words remain applicable today, more than ever.


1 The author wishes to acknowledge the excellent research assistance of Garett Schromm, student-at-law at Rueter Scargall Bennett LLP 2013-14.

2 Environmental Review Tribunal file 12-158; Superior Court of Justice Commercial List file CV-12-9761-00CL; Divisional Court files 143/13 and 144/13. The author was co-counsel for Neil Baker (with Dr. Dianne Saxe) in the Environmental Review Tribunal and Divisional Court proceedings.

3 Northstar Aerospace, Inc. (Re), 2013 ONSC 2719 (CanLII) — 2013-07-18

4 Northern Wood Preservers Inc. v. Director, 3 O.R. (3d) 609, [1991] O.J. No. 684 (Div. Ct.)

5 Caltex Petroleum Inc. v Ontario (MOE), 1995 Carswell Ont 5348, [1995] O.E.A.B. No. 75.

6 General Chemical Canada Ltd. v Director, MOE (2009). Environmental Review Tribunal Feb. 26, 2009 case no. 07-122; Harbert Distressed Investment Fund, L.P. v General Chemical Canada Ltd.; 2006 CanLii 25540 (ONSC)

7 Currie v Director, MOE [2011] O.E.R.T.D. No. 26


9 1990 S.O c. 18, s. 21.

10 See Legislative Assembly of Ontario Debates, March 21, 1990, starting at 1630.

11 TyreKing Tyre Recycling Ltd. v. Ontario (Ministry of the Environment), [1989] O.E.A.B. No. 4, 1989 CarswellOnt 3616.

12 See, for example, Kawartha Lakes (City) v. Ontario (Environment), 2013 ONCA 310 (;

13 Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67.


15 R. v. City of Sault Ste-Marie [1978] 2 S.C.R. 1299

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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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