May 26, 2016 by Canadian Underwriter
Canada’s highest court announced Thursday it will not hear an appeal from a Scarborough, Ont. industrial property owner who lost a lawsuit from a neighbouring property owner arising from environmental contamination.
In a ruling released Nov. 27, 2015, the Court of Appeal for Ontario ruled that a court can award damages, for remediation of a contaminated property, even when Ontario’s Ministry of the Environment and Climate Change has already ordered remediation of the same property.
Section 99 (2) of the Ontario Environmental Protection Act stipulates that the government – or a person – has the right to compensation, among other things, “for 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.”
It was this section that Midwest Properties Ltd. used to sue Thorco Contracting Limited and John Thordarson. Midwest had taken ownership, in December, 2007, of a property at 285 Midwest Rd. in Toronto, about three kilometres southwest of Scarborough Town Centre. Adjacent to 285 Midwest Rd. is 1700 Midland Ave. – between Lawrence Ave. and Eglinton Ave. – which had been owned by Thorco since 1973. Thordarson owns Thorco.
“Thorco’s business activities related to the servicing of petroleum handling equipment and the lining of tanks, and as a corollary to this business, Thorco began storing various materials and wastes on the property in 1974,” wrote Mr. Justice William Hourigan, of the Court of Appeal for Ontario, in its unanimous decision over-ruling a lower court.
Midwest’s lawsuit against Thordarson and Thorco was initially dismissed, in a ruling released Feb. 28, 2013, by Madam Justice Andra Pollack of the Ontario Superior Court of Justice. She found that Midwest “did not introduce evidence of damage or loss pursuant to” section 99 of EPA, “such as actual loss in property value or its inability to use its property or operate its business on its property, or business losses.”
Justice Pollack also ruled that the EPA cannot be interpreted “in an expansive manner that allows damages contemplated by section 99 to include damages for the cost of remediation in circumstances where such remediation has already been ordered under the EPA.”
But the Court of Appeal for Ontario ruled against Thordarson and Thorco Contracting, jointly and severally, for $1.328 million in damages to Midwest under the EPA. Thordarson and Thorco Contracting were also assessed $50,000 each in punitive damages.
Thordarson applied in January for leave to appeal to the Supreme Court of Canada, which announce May 26 it dismissed his leave application, with costs.
“After purchasing 285 Midwest, Midwest became interested in acquiring all or part of the adjoining property at 1700 Midland to expand its operations,” Justice Hourigan added. “Mr. Thordarson provided Midwest with two reports on the property by XCG Consultants Ltd.: a Phase I Environmental Site Assessment completed in 1999, and an update of that report completed in 2001. He also gave Midwest permission to access 1700 Midland for further environmental study. As it was aware that PHC storage was taking place at 1700 Midland, Midwest hired Pinchin Environmental Ltd. to conduct both Phase I and Phase II environmental studies on the property. These reports disclosed PHC contamination at 1700 Midland.”
Midwest alleged in its lawsuit that contaminants from 1700 Midland Ave. “have permeated their soil and groundwater.” In its lawsuit, Midwest asked for statutory remedy under EPA, plus damages for nuisance and negligence and punitive damages.
“As of January 4, 2011, all liquid waste had been removed from 1700 Midland, but during that year concerns still remained about a waste storage pit on the property, unsecured against the infiltration of precipitation, that continued to generate oily water,” Justice Hourigan wrote.
In 2012, the Ministry of the Environment issued a remediation order to Thorco and Thordarson. Included in that order was an instruction to clean up the property at 285 Midwest.
“The possibility of double recovery should not prevent an order for damages for the remediation of contaminated property under s. 99(2) where the MOE has already ordered the remediation of the property,” Justice Hourigan wrote.
“There is no reported case where a court has awarded damages for the cost of future remediation” under section 99 (2) of EPA,” he added. “Nonetheless, in my view, awarding damages under s. 99(2) based on restoration cost rather than diminution in property value is more consistent with the objectives of environmental protection and remediation that underlie this provision.”
The other two Court of Appeal for Ontario judges hearing Midwest’s appeal – Madam Justice Kathryn Feldman and Madam Justice Mary Lou Benotto – concurred.
In its ruling, the Court of Appeal for Ontario referred to statements made in December, 1978 in the Ontario Legislature by Harry Parrott, then Ontario’s environment minister.
“I want to broaden the authority of the [Ministry of the Environment] to order control, cleanup and restoration, and to create liability for compensation for damage resulting from a spill which clarifies and extends the right to compensation at common law,” Parrott told the legislature Dec. 14, 1978. Parrott was tabling Bill 209, the “Spills Bill” that amended EPA and came into force in 1985.
“The amendments will assist any injured party by placing initial responsibility on both the persons who own and control contaminants, that is the people who manufacture, store, transport and market hazardous materials,” Parrott said at the time. “Those responsible will be required to restore the environment affected and will be made liable for damage. By this we mean we expect to reduce the number of spills, to hasten cleanup, and to reduce damage to the environment.”
Parties “who create the risk should pay for restoration as a reasonable condition of doing business,” Parrott suggested in 1978 to the legislature. “It is not up to an innocent party whose land or property has been damaged. At present, persons manufacturing and handling contaminants are not legally responsible in the absence of fault or other legal ground of liability. Common law and the existing provisions of the Environmental Protection Act are inadequate in spelling out the necessary procedures to control and clean up spills and restore the natural environment.”
One goal of the Spills Bill was “to minimize the harm caused through the discharge of pollutants by requiring prompt reporting and clean-up by the party that owned or controlled the pollutant, regardless of fault,” Justice Hourigan wrote in 2015 in Midwest. “The second goal is to ensure that parties that suffer damage through the discharge of pollutants are compensated by establishing a statutory right to recovery from parties that owned and controlled the pollutant.”