1. Evans Sweeny Bordin LLP v.
Zawadzki, 2015 ONCA 756 (Gillese, Lauwers and
Brown JJ.A.), November 9, 2015
2. Catanzaro v. Kellogg's
Canada Inc., 2015 ONCA 779 (Cronk, Epstein and
Huscroft JJ.A.), November 16, 2015
3. Hoang v.
Vicentini, 2015 ONCA 780 (Laskin J.A. (In
Chambers)), November 16, 2015
4. Forsythe v.
Westfall, 2015 ONCA 810 (Gillese, Blair,
MacFarland, Pepall and Benotto JJ.A.), November 24, 2015
5. Midwest Properties Ltd. v.
Thordarson, 2015 ONCA 819 (Feldman, Hourigan and
Benotto JJ.A.), November 27, 2015
1. Evans Sweeny Bordin LLP v.
Zawadzki, 2015 ONCA 756 (Gillese, Lauwers and Brown
JJ.A.), November 9, 2015
In this decision, the Court of Appeal considered the
enforceability of a contingency fee agreement. While most think of
contingency fee agreements in the personal injury context, the
agreement under review in this appeal arose in the commercial
litigation context. The Court was unsympathetic to a client who
tried to wiggle out of paying a large bonus after his law firm
achieved the excellent result that they had agreed would trigger a
bonus.
The appellants, the owners and developers of lands in Fort
Erie, and the respondent lawyers entered into an agreement whereby
the appellants agreed to pay the respondents a bonus of $500,000 if
their appeal from a final order of foreclosure over their lands was
granted. Their appeal was successful, and the law firm rendered an
account for the bonus. The appellants obtained an order to assess
the account, along with two other accounts, before an assessment
officer, who held that the contingency fee agreement was not fair
or reasonable. The legal account of the respondents was reduced by
nearly forty-five thousand dollars and the bonus was disallowed
completely.
On competing motions to oppose confirmation of the assessment
officer's report, the motion judge dismissed the
appellants' motion to further reduce the amount payable and
granted the respondents' claim to the bonus. He found that the
assessment officer lacked the jurisdiction to consider the fairness
and reasonableness of the contingency fee agreement and held that,
in any event, he would have set aside the assessment officer's
conclusion that the agreement was not fair and reasonable.
On appeal to the Court of Appeal, the appellants sought a
restoration of the decision of the assessment officer or, in the
alternative, an order directing the assessment of the agreement
before a judge of the Superior Court of Justice.
Writing for the Court of Appeal, Brown J.A. held that the
motion judge correctly applied the principles in Cookish v.
Paul Lee Associates Professional Corporation, 2013 ONCA 278,
to conclude that the assessment officer lacked jurisdiction to
consider the enforceability of the agreement. In that case, the
Court considered the jurisdiction of assessment officers, who are
not Masters, to consider issues relating to contingency fee
agreements, and held that issues involving the enforceability of
contingency fee agreements – including whether they are fair
and reasonable – should be resolved by judges, not by
assessment officers.
While a judge can refer issues to an assessment officer for
determination pursuant to the reference procedure in Rule 54 of the
Rules of Civil Procedure, a judge should not refer issues
concerning the enforceability of a contingency fee agreement. At
most, a judge may refer to an assessment officer the calculation of
the quantum of a contingency fee under a valid agreement.
Moreover, where a judge does order a reference to an assessment
officer, the assessment order must contain clear language of
delegation. An assessment order which simply refers a bill to an
assessment officer for assessment is insufficient to vest in the
officer jurisdiction to determine disputes arising under a
contingency fee agreement. In this case, the assessment order did
not refer to the assessment officer any questions about
enforceability of the agreement. The motion judge therefore
correctly concluded that the assessment officer lacked jurisdiction
to determine whether the agreement was fair and reasonable.
The appellants submitted that if the assessment officer lacked
jurisdiction to consider the fairness and reasonableness of the
contingency fee agreement, the motion judge should have referred
those issues to another judge of the Superior Court of Justice for
an assessment hearing. They asserted that the motion judge should
not have engaged in his own consideration of the agreement because
he lacked an adequate record on which to determine its fairness and
reasonableness. They further argued that in considering the
agreement, the motion judge failed to accord proper deference to
the assessment officer's findings.
Brown J.A. also rejected these submissions, noting that,
unlike the assessment officer, the motion judge did have
jurisdiction to consider the fairness and reasonableness of the
contingency fee agreement. Rule 54.09(5) of the Rules of Civil
Procedure provides that a judge hearing a motion to oppose
confirmation of a report "may confirm the report in whole or
in part or make such other order as is just." Moreover,
pursuant to Bales Beall LLP v. Fingrut, 2012 ONSC 4991, if
a judge hearing a motion to oppose finds that an assessment officer
committed an error in principle, the judge may either correct the
error or refer the matter back for correction. Having concluded
that the assessment officer lacked the jurisdiction to consider the
fairness and reasonableness of the contingency fee agreement, the
motion judge was entitled to consider that issue.
In Brown J.A.'s view, the record before the motion judge
enabled him to exercise that jurisdiction and fairly consider the
enforceability of the agreement. The parties agreed that each could
file whatever evidence it considered relevant, and the appellants
knew that the issue of the fairness and reasonableness of the
agreement would be argued on the motion. The motion judge was
therefore presented with and able to review all pertinent
documentation concerning the negotiation and execution of the
agreement.
Brown J.A. rejected the appellants' submission that the
motion judge failed to give proper deference to the assessment
officer's findings about the circumstances that gave rise to
the agreement, pointing out that without jurisdiction to consider
the fairness and reasonableness of the agreement, the assessment
officer's findings on that issue were not entitled to any
deference. Brown J.A. observed that, in any event, the motion judge
did give extensive consideration to the assessment officer's
findings and provided detailed reasons why the assessment
officer's criticisms of the solicitors' work arose from
palpable and overriding errors of fact.
Brown J.A. noted that the motion judge considered the fairness
of the agreement as of the date it was entered into, reviewing the
documents recording the parties' negotiation of the agreement,
the agreement itself and the broader factual matrix before
concluding that the assessment officer erred "by making the
contract something he thought it should be, instead of deciding
what the parties agreed to". The motion judge also properly
informed himself of the factors relevant to determining the
reasonableness of the agreement as of the date of the assessment
hearing, placing the greatest weight on the value of the property
and the risk of the lawyers not getting paid. Brown J.A. found that
he committed no errors in doing so, nor was his allowance of the
bonus unreasonable. After all, the respondents' success saved
the appellants the potential loss of lands worth $20 million, and
allowed them to re-gain their lands free and clear of the two
mortgages.
2. Catanzaro v. Kellogg's Canada
Inc., 2015 ONCA 779 (Cronk, Epstein and Huscroft
JJ.A.), November 16, 2015
This case reviews the circumstances when a party can resile
from a settlement negotiated by counsel. It began when a piece of
chicken found its way into a box of breakfast cereal. The
appellants, Claudia and Nick Catanzaro, and their young daughter
Alessia, through her mother, as litigation guardian, sued the
respondent, Kellogg's Canada Inc. for damages suffered when
they discovered a mouldy piece of chicken in a box of cereal that
they had purchased.
A few years after the Catanzaros issued their statement of
claim, counsel for Kellogg's served an offer to settle on the
plaintiffs' counsel, in which Kellogg's agreed to consent
to an order dismissing the action without costs. The
Catanzaros' lawyer informed counsel for Kellogg's that her
clients accepted the offer and provided him with draft motion
materials to have the court approve the Rule 7 settlement relating
to Alessia and a dismissal of the action. Shortly thereafter,
counsel for the Catanzaros notified the Court that the matter had
been settled.
Several months later, however, new counsel for the plaintiffs
notified Kellogg's that his clients were resiling from the
agreement and intended to proceed with the action. Kellogg's
moved to enforce the settlement pursuant to Rule 49.09 of the
Rules of Civil Procedure, seeking approval of the
settlement with respect to Alessia and the dismissal of the
action.
The motion judge ordered enforcement of the settlement as it
affected Claudia and Nick. The motion judge found that the
Catanzaros' previous counsel had the authority to settle the
case, that they had agreed to settle on the terms set out in the
offer and that they failed to meet the onus of establishing that
the settlement, as it related to them, ought to be set aside. The
motion judge also dismissed the motion in relation to Alessia on
the basis that it was not supported by the material required under
Rule 7.08(4) of the Rules of Civil Procedure.
In a brief endorsement, the Court of Appeal dismissed Claudia
and Nick's appeal.
The Court emphasized that the policy of the courts is to
promote settlement. The discretion to refuse to enforce a
settlement therefore ought to be exercised rarely.
Citing the decision of the Court of Appeal in Milios v.
Zagas (1998), 38 O.R. (3d) 218, the Catanzaros argued that the
motion judge erred by failing to consider the circumstances
surrounding the acceptance of the settlement, circumstances which
they claimed supported their position that the settlement ought to
be set aside. The Court distinguished Milios, however,
noting that the factors on which it relied in allowing the
plaintiffs to resile from their settlement agreement in that case,
namely mistake, significant compromise and prompt notification of
the mistake, were not present in the case at bar.
While the factors identified in Milios were relevant
to the motion judge's analysis, the Catanzaros' claim that
the settlement should not be enforced turned on their assertion
that Claudia accepted the offer in haste and under stress. The
Court noted that the evidence did not support either of these
claims. Rather, the record supported the motion judge's
conclusion that the appellants were unable to satisfy their onus of
demonstrating that the circumstances surrounding the acceptance of
the offer to settle were such that they should be allowed to resile
from the agreement.
The Court concluded that the evidence before the motion judge
did not support a refusal to enforce the settlement. His decision
to exercise his discretion to enforce the settlement was entitled
to deference.
3. Hoang v. Vicentini, 2015 ONCA 780
(Laskin J.A. (In Chambers)), November 16, 2015
This appeal in a motor vehicle personal injury action explored
and clarified the dual obligations of an insurer to defend and
indemnify and analyzed the uneasy tension that can exist for
defence counsel, whose prime responsibility remains to the insured,
but who can get into a conflict with respect to that duty as a
result of coverage-related issues which might arise.
Six year-old Christopher Hoang was seriously injured when his
father, Can Hoang, dropped him off at Queens Quay and Yonge Street
in Toronto. Christopher ran into the intersection trying to catch
his wind-blown hat, when, tragically, he was struck by a car driven
by Adriano Vicentini. Christopher, by his litigation guardian, sued
his father, Vicentini, and Ford Credit Canada Leasing Company,
which owned the car driven by Vicentini, for damages for
negligence.
Mr. Hoang's automobile insurer, The Personal Insurance
Company, had him sign a non-waiver agreement which gave him notice
that The Personal might dispute whether he was covered under his
car insurance policy for any liability for the accident. The
Personal appointed the law firm Flaherty McCarthy to act for
Hoang.
A jury found Mr. Hoang solely responsible for the accident,
and assessed Christopher's damages at approximately $835,000.
The jury particularized Can Hoang's negligence. All but one of
those particulars concerned Hoang's negligent parental
supervision of his son and accordingly did not give rise to
coverage under his policy with The Personal. The jury did, however,
identify one particular that could give rise to coverage under the
policy: Can Hoang's negligence in his "unsuitable choice
of unloading area" when he dropped off his son.
The Personal did not add itself as a third party in the action
against Can Hoang. It became a defendant in an action brought by
Can Hoang for indemnification and another by Christopher Hoang for
direct payment of the judgment under section 258(1) of the
Insurance Act, R.S.O. 1990, chapter 18. These claims, both
of which remain unresolved, rely on the jury's finding of
"unsuitable choice of unloading area".
Christopher and the other plaintiffs appealed the trial
decision, requesting that the judgment dismissing the action
against Vicentini and Ford Credit be set aside, that liability be
apportioned equally between those two defendants and Can Hoang and
that the amount of damages be increased. Flaherty McCarthy
meanwhile filed a notice of cross-appeal on behalf of Can Hoang,
asking that the particulars of negligence against Hoang be set
aside and the action against him dismissed.
One of these particulars of negligence was, of course, Can
Hoang's "unsuitable choice of unloading area", the
one particular under which Hoang could claim coverage under his
automobile insurance policy.
Flaherty McCarthy's notice of cross-appeal triggered two
motions to disqualify the firm from continuing to represent Can
Hoang on the appeal and cross-appeal. The moving parties –
the appellants and Can Hoang, in his personal capacity –
claimed that by challenging the jury's finding of
"unsuitable choice of unloading area", a particular for
which Hoang could claim under his policy with The Personal, the
insurer has put itself in a conflict of interest with its insured
or, at the very least, created a reasonable apprehension of a
conflict. They submitted that if that challenge was successful and
the other particulars of negligence found by the jury were not set
aside, then Can Hoang would lose any chance of being indemnified by
The Personal for the judgment against him.
Laskin J.A. granted the moving parties' requested orders,
removing Flaherty McCarthy as counsel of record for Can Hoang on
the appeal and cross-appeal. Laxton Glass was appointed in its
place.
Laskin J.A. identified three governing principles: First,
where a lawyer is appointed by an insurer to defend its insured,
the lawyer's primary duty is to the insured, even though the
lawyer is paid by the insurer and the insurer may eventually have
to pay the claim against its insured; second, an insurer may be
required to relinquish control of the defence and pay for
independent counsel retained by its insured only if there is, in
the circumstances of the particular case, a reasonable apprehension
of conflict of interest on the part of counsel appointed by the
insurer; and third, where the insurer has insisted on a reservation
of rights or its insured has signed a non-waiver agreement, then a
conflict of interest may arise if coverage under the policy turns
on the insured's conduct in the accident giving rise to the
litigation.
Applying these principles to the motions before him, Laskin
J.A. noted that while the potential for conflict between the
interests of an insurer and its insured invariably exists because
of the insurer's dual obligations to defend and to indemnify,
it was even greater when the insurer insists on a reservation of
rights or when its insured signs a non-waiver agreement. The
potential for conflict is greater still in this particular case
because Can Hoang's coverage under his insurance policy was
dependent on the Court's view of his conduct at the time of the
accident and because he is the appellant's father.
In Laskin J.A.'s view, a reasonable apprehension of
conflict was "readily apparent" in this case. A
reasonable bystander might think that insurer-appointed counsel
would focus on overturning the one finding for which the insurer
could be liable to indemnify the insured and downplay or focus less
on the jury's findings of negligent parental supervision for
which the insurer had no obligation to indemnify. Laskin J.A.
emphasized that the test is not actual conflict of interest, but
merely a reasonable apprehension thereof: "appearances
count".
Moreover, for Mr. Hoang, an appellate decision overturning the
finding of "unsuitable choice of unloading area", but
upholding the findings of negligent parental supervision would
leave him without any prospect of indemnification and his son
without any hope of recovery.
Laskin J.A. concluded that the test of reasonable apprehension
of conflict of interest was established and granted the orders
sought.
4. Forsythe v. Westfall, 2015 ONCA
810 (Gillese, Blair, MacFarland, Pepall and Benotto JJ.A.),
November 24, 2015
In this case, a victim of a motorcycle accident unsuccessfully
asked the Court to reconsider its decision in Tamminga v.
Tamminga, thus requiring a five-member panel to hear the
appeal.
The appellant, Rennie Forsythe, was a passenger on a
motorcycle owned and operated by Michael Westfall when the
motorcycle was involved in a single vehicle accident in British
Columbia. Westfall claimed that the accident was caused solely by
an unidentified driver who crossed into his lane of traffic,
causing him to lose control of his motorcycle. Forsythe, who
suffered a severe concussion and brain injury, was treated
initially in British Columbia and Alberta, and later in
Ontario.
An Ontario resident, Forsythe was insured by AXA Insurance
(Canada) under a standard automobile policy which required that she
sue in Ontario to determine whether she had coverage. She commenced
an action against Westfall, his insurer Jevco Insurance Company,
AXA and John Doe, representing the unidentified driver, seeking
damages for her injuries. In her statement of claim, she alleged
that the accident was caused by the unidentified driver, or, in the
alternative, that it was caused or contributed to by Westfall's
negligence.
Westfall moved to have the action against him stayed on the
basis that the Ontario court lacked jurisdiction over him.
The motion judge noted the significance of the fact that the
unidentified driver did not make contact with Westfall's
motorcycle. Under Westfall's policy with Jevco, he was only
entitled to coverage when an unidentified automobile was in
involved in an accident with his motorcycle in which there was
physical contact between the two vehicles. Because no actual
collision occurred, Forsythe might ultimately not have a claim
under her own coverage. The absence of physical contact between the
vehicles meant that if Westfall was not found culpable for the
accident, he might be an uninsured driver for the purposes of the
appellant's policy. If he was found culpable to any degree,
however, then he would be an insured driver and there would be no
need for the appellant to claim under her uninsured motorist
coverage, unless Westfall's liability limits were not
sufficient to compensate her for her injuries. The motion judge
noted the further complication that the appellant's policy
required that she sue in Ontario in order to determine whether she
was entitled to coverage.
Forsythe accordingly argued on the motion that the Court had
jurisdiction simpliciter over her claim against Westfall
or that it should assume jurisdiction under the forum of necessity
doctrine. The motion judge disagreed, however, permanently staying
the action against Westfall on the basis that Ontario lacked
jurisdiction over the claim. Following the Court of Appeal's
recent decision in Tamminga v. Tamminga, 2014 ONCA 478, he
held that Forsythe's automobile insurance policy was not a
factor that satisfied the real and substantial connection test set
out by the Supreme Court in Club Resorts Ltd. v. Van
Breda, 2012 SCC 17. The motion judge declined to distinguish
Tamminga on the basis that the claim in that case was
speculative or contingent; in his view, the appellant's claim
under her insurance policy remained speculative and contingent as
well. The motion judge further held that the forum of necessity
doctrine required that the appellant establish that there was no
other forum in which she could reasonably obtain access to justice.
He concluded that she failed to do so.
Forsythe argued before the Court of Appeal that because
section 4(1)(c) of Uninsured Automobile Coverage, R.R.O.
1990, Regulation 676, and her automobile insurance policy, issued
to her in Ontario, required that an Ontario court determine issues
of liability and damages, her policy was a presumptive connecting
factor that satisfied the real and substantial connection test set
out in Van Breda and gave the Court jurisdiction over the
entire dispute, including her claim against Westfall. This
submission directly challenged the Court's decision in
Tamminga, in which it held that a contract between a
plaintiff and her insurer is not a presumptive connecting factor
that would give an Ontario court jurisdiction over a claim against
an extra-provincial defendant.
Writing for the five-judge panel of the Court, MacFarland J.A.
rejected the appellant's claim that her automobile insurance
policy was a "contract connected with the dispute", one
of the presumptive connecting factors in Van Breda, giving
Ontario jurisdiction over the dispute. The appellant sued Westfall
in tort. Her potential claim against her insurer arose from a
private contract between them. Westfall was not a party to the
insurance policy, nor was he a named insured under its provisions.
The contract neither caused nor increased the likelihood of the
accident; it did not even contemplate the accident. Simply put,
Forsythe's insurance policy "has nothing to do with
Westfall" or with the accident.
The Court of Appeal addressed this issue in Tamminga,
in which an Ontario resident was injured when she fell off of a
truck in Alberta. Strathy C.J.O. held that her Ontario insurance
contract was not a sufficient presumptive connecting factor under
Van Breda to give the Court jurisdiction over the
non-resident defendants.
An automobile insurance contract "anticipates"
accidents generally, but the tortfeasor will not be identifiable in
advance. Unlike the contract in Van Breda, there is
nothing that connects the appellant's insurance contract to the
respondents. They are not parties to or beneficiaries of the
contract. The connection between the insurance policy and the
dispute only arises in the aftermath of the tort and its
application is conditional on the outcome of the appellant's
claim against the tortfeasors.
The decision in Tamminga applied directly to this
case and, as Strathy C.J.O. concluded in Tamminga, there
was no nexus between the insurance contract and respondents.
MacFarland J.A. rejected the appellant's submission that
her claim was distinguishable from Tamminga. She
emphasized that the appellant had a direct claim against her
insurer and was entitled to pursue that claim independently of her
claim against Westfall. Neither Tamminga, nor prior cases
such as Gajraj v. DeBernardo (2002), 60 O.R. (3d) 68,
interfere with that right. However, there was no error in the
motion judge's finding that the appellant's claim against
her insurer was speculative or contingent. If a British Columbia
court found Westfall culpable to any degree, then the appellant
might recover all her damages against him and would no longer need
to proceed with the claim against AXA. The claim in
Tamminga was similarly speculative. MacFarland J.A. noted
that the principles set out in Tamminga applied to the
unidentified driver in this case just as they did to an uninsured
or underinsured driver. She further observed that in deciding
Tamminga, the Court was aware that the plaintiffs were
required to litigate their claims against their insurers in
Ontario, just as the appellant was in this case.
MacFarland J.A. rejected the submission advanced by the
appellant and the Ontario Trial Lawyers Association that the Court
ought to recognize a new presumptive connecting factor based on the
appellant's insurance contract, the fact that she resided in
Ontario and sustained damages in Ontario and the requirement that
she bring suit in two jurisdictions, which might give rise to
inconsistent verdicts. While these factors may be appropriate in a
forum non conveniens discussion, they do not go to the
distinct concept of jurisdiction simpliciter which, as
Lebel J. explained in Van Breda, must be established on
the basis of objective factors connecting the legal situation or
the subject matter of the litigation with the forum.
Justice MacFarland also rejected the appellant's claim
that an Ontario court should assume jurisdiction on the basis of
the forum of necessity doctrine in order to avoid a multiplicity of
proceedings and the potential for inconsistent judgments in Ontario
and British Columbia. MacFarland J.A emphasized that this doctrine
is only available in "extraordinary and exceptional
circumstances". In order for Ontario to accept jurisdiction as
the forum of necessity, the appellant must establish that there was
no other forum in which she could reasonably seek relief. The
appellant could pursue a claim against Westfall in British Columbia
while continuing her claim against AXA in Ontario. The appellant
was not at risk of being denied access to justice.
5. Midwest Properties Ltd. v.
Thordarson, 2015 ONCA 819 (Feldman, Hourigan and
Benotto JJ.A.), November 27, 2015
This appeal allowed a civil remedy to be added onto an
existing regulatory penalty imposed following an environmental
spill. Such an approach did not constitute double recovery and was
consistent with the legislative goal of creating liability for
polluters.
The appellant, Midwest Properties Ltd., and the respondent,
Thorco Contracting Limited, own adjoining properties in Toronto.
For more than twenty years, Thorco was in near-constant breach of
its license and compliance orders issued by Ontario's
environment ministry, storing large volumes of waste petroleum
hydrocarbons ("PHC") on its property. The PHC
contaminated the soil and groundwater, which flowed from
Thorco's property into Midwest's property, contaminating
the latter with significant concentrations of PHC.
The Ontario Ministry of the Environment and Climate Change
("MOE") ordered Thorco and its owner, John Thordarson, to
investigate and remediate Midwest's property. This work was
never undertaken.
Midwest sued Thorco and Thordarson on the basis of breach of
section 99(2) of the Environmental Protection Act
("EPA"), R.S.O. 1990, chapter E.19, nuisance and
negligence. The trial judge dismissed Midwest's claim under
section 99(2) of the EPA on the basis that the MOE had
already ordered the respondents to remediate the property and that
the EPA cannot be interpreted in an "expansive
manner" that might permit double recovery. She also held that
Midwest had not introduced evidence of loss or damage as required
under section 99(2)(a)(i), such as loss in property value. The
trial judge dismissed Midwest's nuisance and negligence claims
on the basis that it had failed to prove damages. She also
dismissed Midwest's claim for punitive damages.
Midwest appealed, seeking judgment for the cost to remediate
its property, approximately $1.3 million. The MOE intervened in the
appeal to challenge the trial judge's finding that its order
that the respondents remediate the property precluded recovery
under section 99(2) of the EPA.
Writing for the Court of Appeal, Hourigan J.A. held that the
trial judge erred in finding that the remediation order precluded
recovery under section 99(2) of the EPA. The private right
of action contained in the impugned provision was designed to
overcome the inherent limitations in the common law in order to
provide an effective process for restitution to parties whose
property has been contaminated. The trial judge's
interpretation and application of section 99(2) was inconsistent
with the wording of legislation and undermined the objective of
establishing a distinct ground of liability for polluters. Her
interpretation would also permit a polluter to avoid its no-fault
obligation to pay damages solely on the basis that a remediation
order exists. Hourigan J.A. emphasized that remedial legislation
should be construed purposively: courts must not "thwart the
will of the Legislature" by imposing additional requirements
for those seeking compensation for pollution that are not contained
in the statute. Justice Hourigan noted that in addition to
violating the general rules of statutory interpretation, the trial
judge's interpretation of section 99(2) was also inconsistent
with the interpretive approach to the EPA mandated by the
Supreme Court in R. v. Consolidated Maybrun Mines Ltd.,
[1998] 1 S.C.R. 706.
Justice Hourigan held that the trial judge further erred in
dismissing Midwest's section 99(2) claim on the basis that the
appellant failed to establish compensable "loss or
damage", such as actual loss in property value, business
losses or the inability to use its property to operate its
business. He found that the trial judge ought to have considered
the cost of restoration of the property as opposed to the
diminution in its value, noting that the former approach is
preferred in environmental cases because the cost of restoration
may exceed the value of the property and an award based on
diminution of value may not adequately fund clean-up. This approach
to damages reflects the "polluter pays" principle, which
holds that, whenever possible, the party that causes pollution
should pay for remediation, compensation and prevention.
Hourigan J.A. rejected the respondents' submission that
compensation under section 99(2) depends on the establishment of an
actionable nuisance, which requires proof of physical injury to the
land or substantial interference with the use or enjoyment of the
land in order to claim damages. The notion that a plaintiff can
only recover if it can prove that the defendant's conduct
constituted a nuisance at common law is "entirely
incongruous" with the purpose of the provision. He also held
that the respondents are not absolved from liability under section
99(2) on the basis that Midwest cannot specify what level of
contamination occurred before and after it purchased the property.
There is no requirement under the EPA for them to do so;
moreover, the respondents should not be able to use their long
history of pollution and non-compliance as a shield.
Justice Hourigan considered the negligence and nuisance claims
in order to determine whether Midwest was entitled to punitive
damages, concluding that the trial judge erred in dismissing both
claims on the basis that the appellant failed to establish damage.
He found that the trial judge erred by failing to consider evidence
that established a diminution in the value of Midwest's
property and a health risk, holding that she committed a palpable
and overriding error in not considering that evidence and in
reaching the conclusion that damage had not been proven. Hourigan
J.A. noted that the other elements of the torts of nuisance and
negligence were also established: the migration of PHC onto
Midwest's property was not "trivial, insubstantial or
unreasonable", and Midwest established that Thorco owed it a
duty of care which it breached, causing the damage suffered. The
appellant established an entitlement to damages under both nuisance
and negligence.
Hourigan J.A. found Thordarson personally liable for the
appellant's damages, observing that Thorco was a small
corporation and that Thordarson controlled its operations. Parties
with control of a pollutant cannot rely on separate ownership of
the pollutant or hide behind the corporate veil to shield
themselves from liability. Hourigan J.A. accordingly held Thorco
and Thordarson jointly and severally liable to Midwest. Finally,
Justice Hourigan held that the trial judge erred in dismissing
Midwest's claim for punitive damages. Thorco's conduct,
including its history of non-compliance with MOE orders,
demonstrated "a wanton disregard for its environmental
obligations", warranting punitive sanctions.
The Court allowed the appeal, substituting judgment against
both respondents jointly and severally for $1,328,000 in damages
under section 99 of the
EPA, and awarding Midwest $50,000
in punitive damages against each of the Thorco and Thordarson.
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