Canada: Section 99(2) Of The EPA Is A "New And Powerful Tool" For Compensation For Contaminated Lands — Midwest v. Thordarson

In its recent decision in Midwest Properties Ltd. v. Thordarson1 the Ontario Court of Appeal comments on a number of significant issues in environmental litigation. This case comment focuses on the Court's findings with respect to a property owner's statutory right of action found in s. 99(2) of the Environmental Protection Act2 and its implications.

Our analysis of Midwest with respect to the calculation of damages can be found here and personal liability for damages, including punitive damages, can be found here.

The Facts

The plaintiff, Midwest, acquired a property in 2007. Before purchasing the land, it commissioned a Phase I environmental report based on a visual inspection of the property. The consultant reported that a Phase II was not required.

Subsequent to its purchase of the land, Midwest became interested in acquiring all or part of an adjoining property owned by the defendant, Thorco Contracting Limited ("Thorco"). After expressing interest in the land, the defendant, Mr. Thordarson, provided Midwest with environmental reports and access to the Thorco property for further environmental investigation. Upon further investigation by Midwest's environmental consultants, extensive petroleum hydrocarbon contamination was discovered on both properties.

The evidence at trial revealed that Thorco, which was in the business of servicing petroleum-handling equipment, had been storing waste petroleum hydrocarbons under improper conditions and in excess of amounts approved by the Ministry of Environment and Climate Change ("MOE") for decades.

At trial, the trial judge held that the defendants were not liable under any of the causes of action plead, including the private right of action contained in s. 99(2) of the EPA. In particular, the trial judge found that Midwest failed with respect to its claim under s. 99(2) of the EPA because: (i) the remedy was unavailable to it, given that the MOE had already ordered the defendants to remediate Midwest's property; and, (ii) Midwest had not proven that it suffered compensable damages.

The Court reversed the trial judge's decision and found that Midwest was entitled to damages under s. 99(2) of the EPA and in nuisance and negligence, although it was not necessary to quantify damages under the common law torts.3 The Court awarded Midwest $1.3 million in damages representing the estimated costs to remediate the Midwest property.

Interpretation of s. 99(2) of the Act

In Midwest, the Court considers liability as against the defendants in the context of a claim under section 99(2) of the EPA. This provision provides a right of compensation for, among other things, loss or damage incurred as a direct result of the spill of a pollutant that causes or is likely to cause an adverse effect from the owner of the pollutant and the person having control of the pollutant.

In its decision, the Court makes clear that this provision should be construed expansively and interpreted purposively. The Court emphasized that it is not the role of the courts to "thwart the will of the Legislature by imposing additional requirements for compensation that are not contained in the statute."4

Noting there was very little case law interpreting s. 99(2) of the EPA, the Court provides an analysis of the underlying purpose of this provision through reference to the legislative context and background of Part X of the Act (which contains s. 99(2)). The Court ultimately concludes that the legislative objective of establishing this distinct ground of liability for polluters was to provide a remedy "designed to overcome the inherent limitations in the common law".5

Recovery of Damages Under s. 99(2)

In finding the trial judge erred in dismissing Midwest's claim under s. 99(2) of the EPA, the Court provides commentary with respect to the recovery of damages under this section in three respects.

First, the Court highlighted that it would be:

a remarkable result if legislation enacted to provide a new statutory cause of action to innocent parties who have suffered contamination of their property did not permit the party to recover the costs of remediating their property, given the EPA's broad and important goals of protecting and restoring the natural environment.6

The Court found that awarding restoration cost as opposed to diminution in property value under s. 99(2) to be "more consistent with the objectives of environmental protection and remediation that underlie" the provision.7

Second, the Court held that the establishment of an actionable nuisance was not necessary to succeed in a claim under s. 99(2). Instead, the Court characterized the statutory right of action under s. 99(2) as a "new and powerful tool" that recognizes the inherent limitations of the common law torts of nuisance and negligence. Thus, issues such as intent, fault, duty of care and foreseeability, which might otherwise bar recovery in the circumstances, are eliminated from the analysis in a s. 99(2) claim. As a result, the right of action imposes strict liability on polluters by focusing only on the issues of who owns and controls the pollutant.

Third, the Court emphasized the defendants could not shield themselves from the full extent of damages incurred by Midwest on the grounds that Midwest could not establish the property was clean at the time of purchase. The Court found there was no requirement under the EPA for Midwest to identify the level of contamination present on the property before and after the purchase. Accordingly, recovery of the full extent of damages could not be avoided on this basis.

Notably, in dismissing the trial judge's concerns about double recovery, the Court found that the language of s. 99(2) did not preclude recovery of remediation costs where an MOE order had been issued against the defendants. Interestingly, the MOE (who intervened in the appeal solely with respect to the double recovery issue) agreed that it would be forced to "redirect" its remediation order in the event that the defendants were ordered to pay remediation damages to Midwest. The Court noted that in doing so the potential for double recovery was eliminated.

Take Away Points

The Midwest decision is likely to spark an explosion of s. 99(2) claims in civil actions due to the Court of Appeal's expansive interpretation of the statutory right of action it affords and the scope of damages that are recoverable under the section. Among other things, Midwest signals to plaintiffs in civil actions that grounding an environmental claim in the typical common law causes of action is no longer necessary if the requirements of a s. 99(2) claim can be met.

Notwithstanding the benefits of utilizing s. 99(2) of the Act as a vehicle to recover damages, the decision (and the submissions of the MOE) suggest that recovery of damages for the cost of remediation under this provision may come at a price. In particular, where an MOE order was already issued against a defendant in a civil action, recovery in the action could result in the issuance of the MOE order against the plaintiff to avoid the potential for double recovery. The resulting exposure to liability in the event of non-compliance with the MOE order presents an unwelcome shadow over what otherwise appears to be a powerful tool for recovery.

Footnotes

1. 2015 ONCA 819 [Midwest].

2. R.S.O. 1990, c. E. 19 [EPA].

3. The Court said that damages for nuisance and negligence would be subsumed in the compensatory damages awarded under the EPA.

4. Supra, note 1 at para 6.

5. Ibid at para 6.

6. Ibid at para 70.

7. Ibid at para 67.

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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