The B.C. Supreme Court issued a key decision in the area of contaminated sites in August, awarding $4.75 million in "reasonably incurred" remediation costs to the plaintiff, JI Properties, Inc. The award compensated JI Properties for money it spent remediating contamination on James Island, B.C. This award is the largest of its kind to date. The decision is potentially precedent-setting, contributing to the development of B.C.'s contaminated sites law in a number of areas. The decision:
- reiterates that "polluter pays" underpins the entire Environmental Management Act contaminated sites regime, by finding the defendant polluter responsible for paying all of the plaintiff's reasonably incurred remediation costs;
- found the limitation period for cost recovery actions under the 1996 Limitation Act is six years and does not begin until all of the costs of remediation are incurred;
- held that comfort letters issued to landowners by the Ministry of Environment prior to the introduction of the EMA are not the same as Certificates of Compliance under the EMA and do not protect a responsible person from liability for remediation costs; and
- applied a broad, purposive approach to evaluating the reasonableness of remediation costs, and accepts that reliance on expert consultants is a strong indicia of reasonableness.
In J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619, JI Properties brought a cost recovery action to recover $5.25 million it incurred remediating contamination on James Island. JI Properties was the island's current owner, which discovered and remediated contamination on the island in 2004-2006.
The defendant was the island's historic polluter, having owned and/or operated explosives manufacturing and storage operations on James Island for at least 30 years.
After a five-week trial, the court awarded JI Properties $4.75 million for its reasonably incurred remediation costs. Key aspects of this decision are as follows:
Polluter pays underpins regime
The court's decision is another in a series of cases in which the courts note that the "whole purpose of the EMA regime is to ensure that the person who pollutes the land pays for the cost of its restoration." In that regard, the court also held that the subsequent land-owners' motives for remediating the land are "largely irrelevant. So long as the remediation methodology and the associated costs are reasonable, the polluter can [be] held liable for those costs." In this case, the court held that JI Properties acted reasonably when it undertook the remediation necessary for it to achieve its development objectives on James Island.
The court did, however, leave open the possibility that in future cases landowners may bear some or all of the remediation costs if the remediation increases the utility or value of the property by an amount that exceeds the costs claimed for the remediation. This question remains to be resolved in a future case.
Deadline to commence a lawsuit (limitation period)
Limitation periods for cost recovery under the EMA have long been an open question. A limitation period is the time within which a party must commence a lawsuit or be barred from doing so. The court here provided considerable guidance on this issue.
First, the court held that JI Properties' claim was not time-barred because JI Properties continued to incur costs of remediation within two years of commencing its action. In the court's view, JI Properties' right to bring its cost-recovery action did not begin until after it incurred all of its claimed costs of remediation. The court based this finding on the unique nature of the statutory cause of action under the EMA and the need to interpret legislation in a way that "should advance not hobble the integrity" of the legislation's regime, which allows for recovery of remediation costs from any "responsible person" absolutely and retroactively.
Second, the court held that, in any event, the appropriate limitation period for this action, which was governed by the 1996 Limitation Act, was six years, not two. Under that Act, there had been some question whether a cost recovery claim was an action "for damages in respect of injury to person or property ... whether based on contract, tort or statutory duty," for which a two-year limitation period was prescribed, or if a cost recovery action was an action not otherwise prescribed and therefore governed by a six-year limitation period. The court found that a cost recovery action (1) is not based on contract, tort or statutory duty and (2) is not an action for damages. For those reasons, it held that cost recovery actions are governed by a six-year limitation period.
Ministry comfort letters are not akin to "certificates of compliance" under the EMA
The court also rejected the defendant's argument that it was immunized from liability because it had remediated parts of James Island before selling it in the 1980s, and had obtained a comfort letter by the Ministry of Environment that recognized this fact.
The court concluded that comfort letters were not akin to Certificates of Compliance, which are statutory instruments available to persons who remediate contaminated sites in compliance with the EMA regime. Only the latter may protect a responsible person from future liability for contamination under the EMA.
Role of environmental consultants
The court also made a number of important comments about the reliance parties may place on their environmental consultants who guide the remediation work. The court held it was "entirely reasonable" for JI Properties to rely on its "highly qualified expert consultant ... to assist with the difficult technical issues and thereafter to follow that consultant's determinations and recommendations respecting the presence and remediation of contaminants." Although the use of a consultant does not "immunize" a landowner from appropriate criticisms about the remediation methodology or cost, the "the selection and use of an appropriately qualified expert is a factor which bestows reasonableness upon the ensuing approach to remediation and the costs associated with same."
This finding is significant because this case was a lengthy trial dominated by expert testimony criticizing the remediation work conducted by SEACOR, the plaintiff's environmental expert. This decision may, in the future, discourage a defendant from attempting to "chip away" at a cost recovery claim by retaining experts to criticize every remediation step taken by a plaintiff. The decision does so by taking a broad, purposive approach to reasonableness that does not nitpick every detail of a remediation.
Reasonable remediation costs
Lastly, the court concluded that most of JI Properties' claimed remediation expenses were "reasonable" and therefore properly part of the amount claimed in the case. The judge noted that JI Properties:
"is a sophisticated entity and had no motive for incurring costs that were not necessary nor for paying for work that was not carried out. As indicated, however, a discount to account for 'gray areas' in arithmetic and allocation is warranted to ensure fairness. A further discount is also appropriate on the same basis to reflect that the "remediation by detonation" approach, whether as a "safety measure" or otherwise, was misguided." (para. 180)
The court also noted the defendant ought to have provided a detailed forensic accounting in its attack of the remediation expenses to expose what it viewed as specific frailties in the plaintiff's claim. As a result, the court offered what it called "rough justice" in terms of a fair discount on the total amount claimed to account for some "gray areas" in the plaintiff's accounting.
Given that only the defendant, not the plaintiff, had contributed to the contamination at issue, the court found that the defendant was fully liable for the reasonable remediation costs incurred by the plaintiff.
In the result, JI Properties recovered 90 per cent of the amount it claimed, with an award of $4.75M dollars issued against the defendant. The defendant had 30 days to file an appeal of the decision.
Originally published in CBA.org