Canada: Does Ontario Court Of Appeal Midwest Decision Signal Big Changes To Environmental Civil Litigation In Ontario?

A potentially very significant decision was released by the Ontario Court of Appeal on Friday November 27, 2015 in Midwest Properties Ltd. v. Thordarson, 2015 ONCA 819. The Midwest decision is a complete reversal of every aspect of the 2013 trial decision.

The Defendant corporation as well as the Principal personally were held to be jointly and severally liable for remediation costs of $1.3 million. Punitive damages in the amount of  $50,000 were made against both the corporation and the principal personally.

The primary focus of the decision is the ability of a plaintiff to recover damages under the statutory cause of action created by section 99 of the Environmental Protection Act (EPA). The Court held that the fact there is an existing MOE order does not preclude the award of damages under the section. This result is not particularly surprising. Many of us were more surprised by the trial result on this point.

Remediation Costs as Measure of Damages

What is probably more significant is the overall "plaintiff friendly" tone of almost every aspect of the decision and the potential far-reaching impact of the remainder of the decision. Particularly important is that the Court held that the measure of damages in contaminated land cases involving migration to a neighbouring property could be remediation costs even if those costs exceeded the property value. This was held to be consistent with the legislative intent of protecting the environment. Many residential sites or smaller sites, especially in rural areas, can easily have restoration costs that exceed the property value.

Damages can be established by a plaintiff even in the absence of hard data establishing the property condition at the time of purchase. The Plaintiff here bought the property in 2007 on the strength of a Phase I report that did not recommend a Phase II. The Defendant's property, next door, had a sordid history of regulatory involvement with the site, a 1988 Certificate of Approval for petroleum hydrocarbon storage that had never been complied with by the Defendant and even a conviction for breaching the EPA by the Defendant. The Court held that evidence by environmental consultants (qualified as experts in "environmental assessment") as to the fact banks would be reluctant to finance and evidence of worsening data and exceedance of Ministry of Environment and Climate Change (MOECC) standards  was enough to establish damages.

But what happens if the Plaintiff does not use the judgment money to remediate the site?

The fact the award was made before the remediation was undertaken is potentially one of the more problematic aspects of the decision. The Court was not concerned that there could be "double recovery" by the Plaintiff since any remediation by the Plaintiff should result in less work by the Defendant under the MOECC order. The judgment is silent on what might happen in the event the Plaintiff chose not to use its damage award to remediate the site. As with any award of damages, the award in this case came with no strings attached. The Plaintiff is free to do what it wishes with the money it receives under the judgment. If it does not clean up the site, the Defendant might still be under an MOE order to remediate (although the Ministry could amend the order based upon the civil judgment).

Should Fairness to the Defendant matter?

The effect of this decision is that the Defendant might well be liable to pay the remediation costs twice - once to the Plaintiff and once to comply with the MOECC order. As is known from other decisions of the Ontario courts, the MOECC is under absolutely no legal obligation to pursue the Plaintiff to undertake the remediation. It can continue to insist that the Defendant undertake all the work under the order.  Fairness to the Defendant does not necessarily matter under the legislative scheme.

In this case, the MOECC was an intervenor at the appellate level.  The decision states that the MOE  "agreed that it would be forced to redirect its remediation order in the event the respondents were ordered to pay remediation damages to Midwest." It is not clear, in light of the lack of a fairness obligation, why the MOECC felt "forced" to make such a commitment. Nor is it clear whether the same result will follow in a future case in which the MOECC is not a party and no such undertaking is given to the Court. Absent such an undertaking, the potential for unfairness to the defendant remains.

Practical Concerns

The appellate decision does not address the practical question of how the plaintiff would remediate their own site if the defendant continued to fail to remediate the source. Would the plaintiff be entitled to sue again in the event of re-contamination? If the plaintiff erected a barrier wall to effectively divert the contamination elsewhere, is the plaintiff incurring its own liability to any downstream owner newly affected by the diverted contamination?

Stay Tuned

The facts of this case were particularly egregious in that the Defendant had a long history of ignoring MOECC Orders and had known for years of contamination at its site. So it is understandable that the Defendant received little sympathy from the Court.  Whether the Court, even on these facts went too far or whether other, less culpable defendants will be caught by the rather broad language of this decision remains to be seen.

This decision is likely to have very significant repercussions. It is the first detailed discussion of section 99(2) of the EPA since that section came into force in 1985. The language of the Court suggests plaintiffs may well now favour pursuing civil damages under section 99 as opposed to claims in negligence or nuisance since the section 99 claim would now appear to be easier to establish. Seeking remediation costs, will likely also increase the damages awards available to many plaintiffs especially ones owning smaller properties.

While the case might still be appealed, given a potentially different approach taken in this case to other contaminated land cases heard by the Ontario Court of Appeal, for now, it appears there is a ground shift.

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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Tamara Farber
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