A Cross-Country Review of Contaminated Land Litigation

Transcription

1 A Cross-Country Review of Contaminated Land Litigation Marc McAree Specialist in Environmental Law Certified by the Law Society of Upper Canada Willms & Shier Environmental Lawyers LLP Toronto Maxxam Analytics Inc. Fall Environmental Technical Workshop Burnaby, British Columbia November 4, 2010

2 Roadmap Environmental Class Actions Foreseeability in Negligence Where Historic Contamination Assessment of Damages Involving Contaminated Land Mitigation of Damages: Clean up to Prescribed Standards versus Risk Assessment

3 Environmental Class Actions

4 Class Proceedings Act Avoid multiple proceedings where common issues Define class of plaintiffs a definable number of persons who allegedly suffered harm from the same event Plaintiff is required to seek court certification of the class Certification is not a ruling on the merits Usual litigation process occurs after certification including trial and appeals

5 Environmental Class Actions Environmental class actions Now viable, several have been certified Only two have gone to and through trial o St. Lawrence Cement and Inco Property trumps health Except in Quebec, most successful environmental class action certifications in Canada are limited to claims for property damage Individual plaintiffs are free to pursue health claims in individual lawsuits

6 Class Action Trends Hollick v. City of Toronto Keele Valley Landfill No common issue to justify certification: SCC Smith v. Inco Port Colborne, Ontario Ontario Court of Appeal granted certification (2006) against Inco for longterm emissions from a nickel refinery in Port Colborne for property value claims, not health claims (withdrawn); trial decision is under appeal

7 Class Action Trends Windsor v. CPR Calgary, Alberta Residents class action certified due to groundwater beneath them which was contaminated with trichloroethylene (TCE), a solvent which was used by the defendant Canadian Pacific Railway Limited (CPR) as an engine and railway rolling stock degreaser for years (Certification upheld by Alberta Court of Appeal in 2007) Wambolt v. Northstar Aerospace Cambridge, Ontario Residents within 3 miles of plant claim loss of property value due to TCE contamination of soil and groundwater based on negligence, nuisance and breach of duty (Certified June 2009)

8 St. Lawrence Cement St. Lawrence Cement v. Barrette November 20, 2008 (SCC) SCC upheld Quebec class action brought by neighbours of a St. Lawrence Cement facility for causing odour, noise and dust annoyance to neighbours SCC found a scheme of no-fault civil liability for neighbourhood disturbances in French civil law and Canadian common law

9 Sydney Tar Ponds MacQueen v. Ispat Sidbec Inc. Claim filed May 24, 2004 and subsequently amended Governments had operated steel company before bankruptcy and assured residents that it was safe to continue living in their homes Residents launching class action against Nova Scotia and federal governments and former owner/operator of steel company Residents alleged that governments had a fiduciary duty to residents and breached that duty by failing to warn them about health risks that the government knew about

10 Sydney Tar Ponds Governments challenged allegation of breach of fiduciary duty Court challenge dismissed by Supreme Court Nova Scotia has no class proceedings legislation Nova Scotia Supreme Court will now proceed with certification hearing under common law class action principles How will this case affect the duty of industry and government to warn residents of potential environmental and health risks?

11 Smith v. Inco: Issue The plaintiffs asserted that nickel emissions contaminated the Port Colborne environment, especially a low-income area adjacent to and downwind from the refinery Testing by the Ministry of the Environment confirmed this Initially, the plaintiffs sought damages for Diminution in property value Health impacts

12 Smith v. Inco: Certification In 2003, the Divisional Court found insufficient commonality between members to constitute the proposed class, and dismissed the appeal In 2006, the Ontario Court of Appeal certified the class action when the plaintiff abandoned its claim for health impacts Eliminated much of the uncertainty that the lower courts struggled with. Ultimately, the class was certified for claims relating to diminution in property value only

13 Smith v. Inco: Trial In July 2010, 7,000 property owners were awarded $36 million for reduced property value Trial decision raised issues of Strict liability Nuisance Limitation period and discoverability Standard for civil liability Inco held liable under nuisance and strict liability

14 Smith v. Inco: Trial Strict Liability Rylands v. Fletcher Reasonable use of land for lawful commercial purpose is NOT a defence to strict liability Damage does not need to be the result of an isolated escape Private Nuisance Nuisance can be caused indirectly, but there must be actual damage Physical damage includes diminution in property value due to contamination o in this case the claim is for the physical damage, not inconvenience Claim can be made for decreased property value even though the plaintiff s property was not sold or there was no attempt to sell the property

15 Smith v. Inco: Trial Limitations and Discoverability In Ontario, there is now a 2 year limitation period to bring a claim Begins to run when knew or ought to have known that there is a claim Inco had not operated its refinery for 26 years Plaintiffs claimed that public disclosure in 2000 about the nickel contamination in soil resulted in decreased property value

16 Smith v. Inco: Trial Limitations and Discoverability Court held that o cause of action did not arise until plaintiffs knew or ought to have known that nickel soil contamination caused loss in property value o even using reasonable due diligence, real estate agents would not have known about reduced property value until public disclosure in 2000 o if real estate agents were unaware of the effect of nickel soil contamination on property value, it was unlikely that members of the public would be aware Result: Action not barred by limitation period

17 Smith v. Inco: Trial Standard for Civil Liability MOE sets the standard for property clean ups o based on risk to human health o not based on impacts to property value MOE does NOT set the standard for civil liability o Courts set the standard for civil liability o Court in Inco was concerned about property value not health effects o this begs the question what is the effect of future reliance on MOE Standards as evidence of contamination?

18 Smith v. Inco: Trial Decision has significant implications Environmental class actions are now viable for plaintiffs Industry is on notice that operations cannot be permitted to negatively impact neighbours Decades old pollution may surface as the basis for civil liability in class actions Courts will try to be lenient with limitation expiry, if logically possible Inco filed Notice of Appeal to the Ontario Court of Appeal on August 3, 2010

19 Foreseeability in Negligence Where Historic Contamination

20 Berendsen v. Ontario - Trial Chronology January 18, 2008, Ontario SCJ (Trial) December 1, 2009 Ontario Court of Appeal overturns trial decision October 7, 2010 Friends of the Earth applies for leave to intervene (not yet decided) May 20, 2010 SCC grants leave to appeal At trial, $1.7 million award against Ontario government for negligence for Disposing of waste asphalt from highway construction near water supply on dairy farm Failure and breach of duty to properly exercise its statutory powers of investigation and remediation of impaired farm water

21 Berendsen v. Ontario - Trial Facts MTO buried road reconstruction waste on farm, near watercourse Subsequent purchaser s dairy cows suffered health effects and low milk production Issues Government liability in negligence for o depositing the road bed waste (MTO) o not carrying out its statutory duties to investigate and remediate (MOE)

22 Berendsen v. Ontario Trial Crown s standard of care was taken in context of its statutory powers of Highway repair and maintenance Water protection Environmental protection Court found that even in the 1960s and 1970s Crown employees should have reasonably known about the hazards of burying road bed waste near water on a dairy farm Crown unsuccessfully argued that it had no duty of care where contamination did not exceed the Ontario Drinking Water Objectives

23 Berendsen v. Ontario Appeal Ontario Court of Appeal overturns trial decision [85] I would allow Ontario s appeal, set aside the judgment at trial and dismiss the action. In my view, Ontario was not negligent when it deposited waste materials on the farm in the 1960s. Because the risk of harm was not then reasonably foreseeable, Ontario did not breach the standard of care [86] Nor did Ontario have a duty in the 1980s or 1990s to eliminate the waste material and remediate the Berendsens well water. No duty existed under the Ontario legislative regime protecting our environment. And Ontario was justified in not taking further action when both its investigation and investigation conducted for the Berendsens showed that no chemicals in the Berendsens well water exceeded the allowable provincial drinking water standards

24 Berendsen v. Ontario SCC Supreme Court of Canada has tentatively scheduled the appeal hearing for January 28, 2011 Issue of foreseeability for historic contamination will be at the fore of what the Supreme Court of Canada decides What was the standard of care when the contamination occurred and was it then foreseeable that today s known outcome would be the result? The Supreme Court s dictum about this question in Berendsen will have significant implications for claims involving historic contamination

25 Assessment of Damages Involving Contaminated Land

26 Tridan v. Shell Canada - Trial Tridan sued for $1.6M 9,000 litres of fuel was lost at the service station and some migrated next door Adjacent property was occupied by a profitable Ford dealership Current use for car sales and repair could be lawfully continued without clean-up Before trial, Shell admitted liability and indemnified Tridan for extra financing costs relating to the contamination

27 Tridan v. Shell Canada - Trial The trial judge ordered Shell to pay $550,000 for clean-up costs to pristine (more stringent than the MOE Guideline) $20,000 for business interruption during remediation $25,000 for increased mortgage financing costs (4 months) $85,000 if Shell did not construct a contaminant barrier $350,000 for loss of property value based on stigma even after damages to clean up to pristine (17% - 18%)

28 Tridan v. Shell Canada - Appeal Ontario Court of Appeal January 3, 2002 There is no stigma loss where damages are awarded for clean up to pristine A clean up to MOE Standards would result in an award of 12% to 15% stigma $85,000 should be paid without conditions No order to pay monies into Court In the end, CofA awarded damages for the cost to clean up to pristine plus nil for stigma SCC refused leave to appeal October 3, 2002

29 Cousins v. McColl- Frontenac - Trial Value of property uncontaminated: $100,000 Claim for Clean Up Cost: $1.5M to $2.3M Damages awarded: $125,000, representing one-third of total net investment of $376,000 (including interest) in three parcels of land A plaintiff is entitled to recover reasonable damages for contamination of land Damages may not be the cost of clean up where property value is less than the cost to clean up

30 Cousins v. McColl- Frontenac - Appeal New Brunswick Court of Appeal January 21, 2008 Appeal Court issued a brief and insubstantial 1 ½ page decision Appeal Court agreed that damages should not be awarded on an as is purchase Appeal Court agreed that damages should be assessed by reference to net investment and carrying costs plus interest which is unrelated to the cost to clean and/or diminution in value Supreme Court of Canada granted leave (April 3, 2008) but the case settled before the hearing

31 Lessons from Tridan and Cousins Owners do not have to sell or clean up to successfully sue for damages Damages for diminished property value will be based on the best evidence available to the courts; this may include the estimated costs to clean up the site, and or appraisal evidence of loss of value; the quality of expert appraisal evidence will be a critical factor Owners may also recover related financing and business disturbance losses

32 Lessons from Tridan and Cousins The court accepted evidence that the property value may be reduced by stigma even after the property is cleaned up to Ministry standards, but the court found that there was no evidence of stigma after clean-up to pristine condition If you happen to own lower value property or property in a less highly valued part of the country, you should not expect damages based on the cost to clean up

33 Mitigation of Damages

34 Mitigation of Damages Mitigation: the principle that a plaintiff may not recover losses that could have been avoided by taking reasonable steps Applies to tort and contract law Mitigation is intended to Minimize the total costs of the tort or breach of contract Avoid unduly burdening the defendant Negate a windfall for the plaintiff Failure of the plaintiff to mitigate can result in limiting the plaintiff s damages

35 Mitigation of Damages Can a plaintiff choose a more expensive contaminant remediation method and expect the defendant to pay? How much is too much mitigation? Question of fact plaintiff must take reasonable steps Burden of proof to show plaintiff s failure to mitigate is on the defendant In case of doubt, the plaintiff will usually receive the benefit Reasonable action may not always be the most economical choice available

36 Mitigation of Damages Where the cost to repair the damage exceeds the market price of the property, the owner is expected to follow the most economic path Plaintiffs claim they are entitled to remediation to Ministry standards or pristine Tridan v. Shell Canada

37 Mitigation of Damages Defendants claim that under the duty to mitigate, plaintiffs are entitled to the cost of Risk Assessment plus risk management measures and possibly damages for stigma Why the debate? The difference in cost to remediate to Ministry standards may be orders of magnitude greater than Risk Assessment cost Risk Assessment is becoming more acceptable in the marketplace (slowly but surely) In Ontario, both methods result in a Record of Site Condition filed on the Environmental Site Registry MOE good housekeeping seal of approval No Canadian Court has decided this issue; this will not be the case for long!

38 Contact Information Marc McAree (416) Willms & Shier Environmental Lawyers LLP