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No-Fault Orders Dumping Clean-Up Costs

by Julian Hutchinson

The Ontario Court of Appeal (“OCA”) recently upheld an environmental cleanup order made by provincial officials against a city in 2009 resulting from a spill of furnace oil from a residence whose owners had reached the limits of their insurance coverage; City of Kawartha Lakes v. Director, Ministry of the Environment [2009] . The City of Kawartha Lakes was not at fault for the spill, but was billed for cleaning up the contamination; because, as noted by the court, cleanup orders are intended to protect the environment rather than to lay blame.

In December 2008, several hundred litres of furnace oil had leaked from the basement of a home on the shore of Sturgeon Lake and had entered the lakes’ storm sewer system that drains into the lake. Although the home owner had contacted his insurance company and had been served with a cleanup order from the Technical Standards and Safety Authority (“TSSA”), court records indicate that by March 2009, the insurance coverage had reached its limit.

The City contended its innocence and requested a review of the Ontario Ministry of the Environment (“MOE”) cleanup order. The MOE then issued a confirming order, which the City appealed to the Environmental Review Tribunal (“ERT”), a quasi-judicial body, and which was dismissed in July 2010.

The City appealed this ruling to Divisional Court, but the order was upheld in May 28, 2012. It then appealed the Divisional Court’s ruling, which the OCA upheld in May 10, 2013. The original ERT ruling rejected the advice by a prominent law firm to its clients. It must be noted there was no maximum limit on costs for a corporation (or a city) that had been issued an environmental cleanup order, but before the Kawartha Lake ruling in 2009, ERT had been interested in hearing arguments that— someone served with an order should not be imposed with liability.

In light of the ERT ruling, she stated that anyone in control of property could be faced with a cleanup order and they would have to comply, as stated in Section 157.1 of the Ontario Environmental Protection Act.

During the ERT hearings with Kawartha Lakes, the City agreed that the environment ministry had jurisdiction to issue a cleanup order against it because it owned property on to which oil had flowed. However, it argued that the order was contrary to the ‘polluter pays’ principle—the party causing the pollution would be responsible for remediation.

In a separate action, the City had sought recovery from the home owner, the supplier of the fuel, and the TSSA. On May 10, 2013, the OCA noted that the City’s lawsuit had not yet concluded. The original defendants also included the province, Farmers Mutual’s adjuster (R. Ian Pepper Insurance Adjusters Inc.), a contractor hired to investigate the cause of the spill and remediate it both on and off the residential property (D.L. Services Inc.) and the manufacturer of the oil tank, Les Reservoirs D’Acier de Granby Inc.

In March 2012, the Ontario Superior Court of Justice dismissed the City’s claim of breach of statutory duty under the Environmental Protection Act against Farmers Mutual, Pepper Insurance Adjusters and D.L. Services. Despite the lawsuit which it pursued separately, the City still wanted to make arguments before the ERT as to who was at fault.

In its May 2012 decision upholding the ERT ruling, the Divisional Court’s decision was that the City should pay remedial costs. This Court also found that the ERT had been just regarding fairness in the City’s appeal.

OCA Decision

On behalf of herself, Whalen, and Herman JJ, Madam Justice Harriet Sachs wrote that, in trying to introduce evidence of blame, the court found, that the City was seeking to turn the appeal into a hearing before the Tribunal which would determine who was at fault for the contamination.

In its ruling on May 10th 2013, the OCA agreed that evidence of fault was not relevant in whether an order against the City should be revoked; instead it was the need to serve the environmental protection objective of the legislation. Those objectives, cited by the Divisional Court in its May 2012 ruling, were not simply to repair damage from human activity to the environment, but primarily to prevent contamination of the province’s environment. In 1998, the Supreme Court of Canada had written that this objective required rapid and effective action to ensure prompt action where necessary.