Canada: Uncertain Ground: Owners May Be Liable For Unforeseeable Environmental Effects

In Huang v. Fraser Hillary's Limited, 2018 ONCA 527, the Ontario Court of Appeal recently ruled that foreseeability of harm is not an element of the tort of nuisance in the context of historical environmental contamination of a neighbouring property by a dry-cleaning business.

Background

Fraser Hillary's Limited ("Fraser") had operated a dry-cleaning business on the same property in Ottawa since 1960. Between 1960 and 1974, solvents used in the dry-cleaning process were discharged and subsequently contaminated the soil and groundwater on the adjacent property owned by Mr. Huang. Fraser had used the solvents in accordance with best practices at the time – the recommended disposal method at the time was to simply pour the solvents out on the ground – and the environmental dangers of the solvents were not known. In 1974, Fraser purchased new equipment which eliminated the potential for further discharges.

The contamination was not uncovered until 2003 during the course of a environmental assessment of Mr. Huang's property. Mr. Huang subsequently brought an action and Fraser was held liable under the tort of nuisance and section 99 of the Environmental Protection Act, R.S.O. 1990, c. E.19 ("EPA") and ordered to pay damages of over $1.8 million. The claims based on the torts of negligence and trespass and the rule in Rylands v. Fletcher were dismissed.

Fraser appealed, arguing that foreseeability of harm was a constituent element of the tort of nuisance and section 99 of the EPA was being applied retrospectively.

A Break Between Canadian and English Law: Foreseeability Not an Element of Nuisance

In a unanimous decision, the Court of Appeal held that foreseeability of harm is not an element of the tort of nuisance. The tort of nuisance has only two elements:

  1. A person is responsible for an act indirectly causing physical injury to land or substantially interfering with the use or enjoyment of land or an interest in land; and
  2. The injury or interference is unreasonable in light of all the surrounding circumstances.

Hourigan J.A. noted that reasonability foreseeability as an element of nuisance (i) has been accepted in English law, (ii) had been accepted by lower court decisions in Ontario, and (iii) had been accepted in leading Canadian tort law texts based on this case law. However, the Court charted a different path for the law in Ontario.

The Court stated that the addition of a foreseeability requirement would blur the distinction between negligence and nuisance and there were good policy reasons for maintaining the independent strength of the tort of nuisance:

[22]      While I acknowledge the divergence in British law and the fact that the law may be evolving in this country, in the absence of any binding Canadian authority I conclude that foreseeability is not a necessary part of the tort of nuisance in Canada.

[23]      I also fail to see the policy imperative for importing this additional requirement into our test for nuisance. The tort is a useful tool in the prosecution of environmental claims and is consistent with the Supreme Court of Canada's espousal of the principle that the polluter must pay: see St. Lawrence Cement Inc. v. Barrette, 2008 SCC 64 at para. 80. The addition of a foreseeability requirement blurs the distinction between negligence and nuisance. If we were to accept Fraser's submission, the utility of the tort would be compromised. I would therefore reject this ground of appeal.

This is consistent with the Ontario Court of Appeal's prior comments in Smith v. Inco Limited, 2011 ONCA 628:

[40]      ... Nuisance, unlikely negligence, does not focus on or characterize the defendant's conduct. The defendant's conduct may be reasonable and yet result in an unreasonable interference with the plaintiff's property rights. The characterization of the defendant's conduct is relevant only to the extent that it impacts on the proper characterization of the nature of the interference with the plaintiff's property rights.

Accordingly, regardless of the fact that the impact on Mr. Huang's property was not foreseeable at the time of Fraser's actions between 1960 and 1974, Fraser could be held liable in nuisance as the use of Mr. Huang's property was significantly and unreasonably interfered with as a result of the contamination.

Foreseeability May Be an Element of the Rule in Rylands v. Fletcher

By way of contrast, it continues to be an open question in Canadian law whether foreseeability of damage is an element of the rule in Rylands v. Fletcher, which holds an occupier of land strictly liable where they have brought or kept on their land an exceptionally dangerous or mischievous thing in extraordinary or unusual circumstances and that thing escapes and causes damage, subject to certain defences.1

For example, if a person keeps a Bengal tiger as a pet in a residential area and it escapes and mauls a neighbour, the owner will be prima facie liable under the rule in Rylands v. Fletcher for any injuries the neighbour sustained. However, what if the neighbour keeps a rare Palm Cockatoo in their basement and that becomes a $16,000 lunch for the Bengal tiger? Should the owner of the Bengal tiger be held liable for that damage, when there was no reason to foresee that the damage might result from keeping the wild animal on the property?

In Smith v. Inco, the Ontario Court of Appeal held that the normal course operation of a nickel refinery by Inco for over 60 years in a heavily industrialized part of Port Colborne, Ontario was not "an exceptionally dangerous or mischievous thing" and that the circumstances were not "extraordinary or unusual," thus the rule in Rylands v. Fletcher did not apply. In light of this finding, the Court did not have to address the foreseeability question and expressly declined to do so as "[t]he role, if any, of foreseeability of damages under the rule in Rylands v. Fletcher is an important jurisprudential question." However, in obiter, the Court noted that there were compelling reasons to require foreseeability of damage:

[108] The role, if any, of foreseeability of damages under the rule in Rylands v. Fletcher is an important jurisprudential question. To our knowledge, neither the Supreme Court of Canada nor any provincial appellate court has examined whether foreseeability of damages is an element of liability under Rylands v. Fletcher. We do not propose to decide the issue in the absence of full argument.

[109] We will, however, make two observations that may be of assistance in future cases. First, foreseeability can refer to objective foreseeability of the escape from the defendant's land of the thing that causes damage or it can refer to objective foreseeability of the kind of damage said to have been caused. We see no reason to require foreseeability of the escape. To impose that requirement would all but merge the rule in Rylands v. Fletcher with liability in negligence.

[110] There are, however, compelling reasons to require foreseeability of the kind of damages alleged to have been suffered by the plaintiffs...

Some subsequent decisions have cited Smith v. Inco in considering foreseeability of harm when applying the rule in Rylands v. Fletcher.2 In Huang, the Court of Appeal appeared to reaffirm this position,[3] however the jurisprudential question still has not been squarely addressed by an appellate court in Canada. Foreseeability is an element of the rule under English law.

Liability May Be Imposed Under EPA for Spills Prior to Part X Coming Into Force

Part X of the EPA, which imposes duties to report and remediate spills and imposes liability for damage caused by a spill, was not proclaimed into force until 1985. Fraser argued that Part X had no application since the spills ceased in 1974.

The Court held that this did not amount to retrospective application of Part X of the EPA. Section 93(1) of the EPA requires "[t]he owner of a pollutant and the person having control of a pollutant that is spilled and that causes or is likely to cause an adverse effect to forthwith do everything practicable to prevent, eliminate and ameliorate the adverse effect and to restore the natural environment." Section 99(2) of the EPA imposes liability for loss or damage incurred as a direct result of a failure to carry out a duty imposed under Part X.

Once section 93(1) came into force in 1985, it imposed a duty on all those that had previously owned or controlled a pollutant at the time it was spilled, regardless of whether that discharge was ongoing, to take steps to remediate it. By failing to comply with this duty, Fraser could be held liable under section 99(2) of the EPA:

[31]      In my view, the trial judge did not retrospectively apply the EPA. Time does not freeze in 1974 for the purposes of liability under s. 99(2). Accepting for the purposes of this argument that the spills ceased in that year, there was an ongoing obligation under s. 93 of the EPA to remediate the damage. That remediation has not been done. Therefore, there is liability under s. 99(2)(a)(i) and (ii) because Fraser has not fulfilled a duty imposed on it under Part X of the EPA. In short, while the spills may have occurred before Part X of the EPA was enacted, Fraser's obligations under that part of the legislation are ongoing.

Takeaways: Compliance With Best Practices Does Not Insulate Against Future Liability

The Huang decision is yet another reminder that property owners and business operators should stay abreast of the constantly-evolving environmental regulatory framework and how it may apply to current and historical practices on site.

Despite doing everything right at the time, an owner/operator can still face liability if the regulatory ground shifts under them. A practice that is consistent with the current legislation, guidelines, environmental knowledge and best practices may result in liability as the regulatory framework evolves if the owner or operator does not promptly respond by modifying its practices and remediating the environmental effects of the prior practice. In addition to keeping its eyes forward on the current and future regulatory framework, an owner/operator would be well advised to take a look backward and conduct a review of historical practices on site and whether they comply with current norms.

Footnote

1 The five major defences are (i) consent of the plaintiff, (ii) default of the plaintiff, (iii) act of god, (iv) deliberate act of third person, and (v) legislative authority.

2 Windsor v. Canadian Pacific Railway, 2014 ABCA 108 at para. 20-21; 10565 Nfld. Inc. v. Canada (Attorney General), 2017 NLTD(G) 84 at paras. 332-349.

3 Huang at para. 19.

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