Taking the cleaner to the cleaners: statutory liability for pollutant spills post-Midwest

Environmental Alert

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In a decision released in March 2017, Huang v Fraser Hillary’s Limited (“Huang”), the Ontario Superior Court of Justice used section 99(2) of the Ontario Environmental Protection Act (“EPA”) to anchor liability and award the plaintiff $1,632,500 in damages for remediation, in addition to $201,726 for expert costs incurred during litigation.  The plaintiff’s losses stemmed from the historical and continuing migration of dry cleaning chemicals from the defendant corporation’s nearby dry cleaning operation to the plaintiff’s lands. The president and sole director of the defendant corporation was also sued, both in relation to the dry cleaning operation and in his personal capacity as the owner of an intervening property.  The case is a clear indication that section 99(2) provides a powerful, efficacious remedy for plaintiffs seeking compensation for historical spills in situations where it has traditionally been difficult to prove a defendant’s liability in negligence, nuisance, or strict liability. 

Background

The defendant corporation owned and operated a dry cleaning facility at the property since 1960.  The Plaintiff alleged that dry cleaning chemicals were spilled in different locations on the dry cleaning property, which in turn caused harm to the plaintiff’s properties. The Court found that the plaintiff’s expert evidence clearly supported that the chemicals entered the environment due to dry cleaning waste disposal procedures from 1960-1974, and that subsequently a number of source zones were created where the contaminants pooled underground. Evidence that these source zones continue to spread the contamination as groundwater flowed through them was accepted by the Court. The defendants called no evidence. The plaintiff pled five potential causes of action: nuisance, negligence, liability under section 99 of the EPA, trespass, and strict liability under the doctrine of Rylands v Fletcher.

Statutory liability pursuant to section 99 of the EPA

The Court relied upon the Ontario Court of Appeal decision in Midwest Properties Ltd v Thordarson, which first established section 99(2) as a cause of action separate and apart from liability in negligence or nuisance.  Based on the statutory definition of “spill” in section 91(1), the Court concluded that spillage that could attract liability under Section 99 occurred between 1960-1974.  However, the underground migration of the chemical contaminants onto neighbouring properties did not constitute a “spill” under the EPA because the chemicals were already in the natural environment at that point.

Despite the fact that there was no existing statutory right to compensation for private individuals at the time during which the spills were occurring, the Court held that recovery under section 99(2) was still possible because

  1. it was not clear that its application would constitute retroactivity,
  2. the presumption against retrospective application is inapplicable where a provision is designed to protect the public, and
  3. any presumption against retroactivity is rebutted in this case by the clear intention of the legislature.

The Court found that section 99(2) was intended to provide for compensation now for all spills, not simply those that occur after the legislative provision came into effect, and consequently found the defendant corporation liable to the plaintiff as “the owner of the pollutant and the person having control of the pollutant” immediately before it was spilled.

Treatment of other causes of action

On the ground of nuisance, the Court held that the interference with, or damage to, the plaintiff’s land is unreasonable and substantial or non-trivial. The interference is unreasonable because the chemical contaminants found on the plaintiff’s properties exceeded the Ministry of Environment and Climate Change (“MOECC”) standards; the plaintiff cannot redevelop his properties unless costly remediation occurs; migration of the chemicals is continuing; and the defendant corporation had not responded to the MOECC’s requests for additional information or its order for access to assess the potential adverse health and safety impacts of the contamination on nearby residents.  As a result, the Court found private nuisance against the defendant corporation, but not as against the personal defendant.

The Court declined to make a finding of negligence against either the personal defendant or the defendant corporation on the basis that causation was not proven.  While both defendants owed the plaintiff a duty of care, the evidence showed that, prior to 1975, no special care was required in dealing with the dry cleaning chemicals at issue because the adverse health and environmental effects were not yet known. It was thought that pouring these chemicals on the ground was an adequate method of disposal. Therefore, spills before 1974 did not breach the applicable standard of care.  Between 2002 and 2013, the corporate defendant did take reasonable measures.  However, from 2013 onward, the defendant corporation failed to remain engaged in the consultation process it had begun with its expert to prevent or limit the contamination of neighbouring properties, and was in breach of the standard of care. Despite this breach, the plaintiff was unable to prove on a balance of probabilities that his damages were a result of the defendants' negligent conduct, since there was no evidence introduced that the contamination of the plaintiff’s lands worsened from 2013 onward as result of the defendants’ inaction.

The issue of trespass was dealt with summarily by the Court; since none of the chemical spills occurred directly on the plaintiff’s properties, and the resultant damage was instead caused by the indirect migration of the chemical contaminants, the trespass claim was dismissed.

Regarding strict liability, during the 1960s and 1970s the safety of dry cleaning chemicals was not in question, so the requirement of the rule in Rylands v Fletcher that the substance be “likely to do mischief if it escaped” was not met in this case. Similarly, there was no evidence put forth that the use of the dry cleaning chemicals was not a “non-natural” or “special” use of the defendant corporation’s land at that time, and therefore the defendants were not found strictly liable.

Damages assessment

When assessing damages, the Court considered the reasonableness of three of the eight different remediation alternatives presented by the plaintiff; the cost of the three options examined ranged from $1.2 million to $8.7 million. The Court did not consider scenarios that sought very costly remediation of the entire source area, including a dig and dump as part of a future development, focussing only on those that isolated the plaintiff’s properties and that could be commenced quickly. The Court ultimately assessed damages based on an option that called for in situ remediation and the installation of a reactive barrier on the plaintiff’s land to remediate the properties to the residential standards on the basis that the plaintiff intended to develop its lands and the evidence demonstrated that a residential use was the lands’ highest and best use. After increasing the associated cost of the option chosen for contingent repairs or replacement of the barrier after 15 years, the Court arrived at a damages award of $1,632,500 for the remediation of the plaintiff’s lands.