No Harm, No Nuisance - The Ontario Court of Appeal Lays Out What Will, and Will Not, Fly in Proving Nuisance: Smith v. Inco Limited

Tamara Farber, Toronto

Introduction

On October 7, 2011 the Ontario Court of Appeal released its decision in Smith v. Inco Limited, 2011 ONCA 628.  The case was brought as a class proceeding by a number of residents of Port Colborne, Ontario who sought compensation for the alleged pollution of their lands by the defendant, Inco.  Inco had operated a nickel refinery in the area for over 6 decades.  It was not alleged that Inco had operated negligently or unlawfully.  Initially, the claims advanced on behalf of the class included claims for personal injuries and adverse health effects due to the emission of a wide variety of pollutants, including nickel particles.  By the time the action reached trial, the health claims had been dropped and the only claim left related exclusively to property values.  The plaintiffs argued that Inco’s everyday operations constituted an actionable nuisance which entitled them to damages. The appeal decision overturned a trial ruling ordering Inco to pay $36 million to the class members. The unanimous decision of the Court of Appeal represents the most recent statement of the law of nuisance by an appellate Court in Ontario and its reasons likely provide considerable precedential guidance on the subject across Canada.

When the matter first proceeded to trial at the Ontario Superior Court of Justice, the trial judge found that soil on the properties of the plaintiffs (within various distances from Inco’s operations) had indeed been contaminated with nickel as a result of emissions from Inco’s nickel refinery.  The trial judge found that concerns about the levels of nickel “caused widespread public concern and adversely affected the appreciation in the value of the properties after September, 2000”.  These findings resulted in the trial judge holding Inco liable in private nuisance and strictly liable under the rule in Rylands v. Fletcher.  The rule in Rylands v. Fletcher provides strict liability for the release of dangerous substances resulting from an “unnatural use of the land”.  The trial judge held that the process of nickel refining was an unnatural use of the land and the emission of nickel particles constituted the release of a dangerous substance.  Damages were fixed at $36 million.  Inco appealed, arguing that the presence of nickel in the plaintiffs’ soil did not amount to actual harm or property damage, and more significantly, that the operations on the Inco site did not amount to an “unnatural use of land”.

Nuisance

The Court of Appeal first addressed the trial judge’s finding that Inco was liable to the plaintiffs for damages in nuisance.  The Court noted that the “raison d’etre of nuisance is to equip a party who is suffering damage to his land or interference with his use of the land with a means of forcing the party causing the damage to stop doing so”.   Nuisance may take the form of physical injury to land or substantial interference with the plaintiff’s use or enjoyment of his or her land, (the latter sometimes described as “amenity nuisance”).  The claimants did not argue “amenity nuisance”, only that the nickel particles caused physical injury to their property.  Nuisance provides a remedy to a party who has suffered harm as the result of the action of another party, even if that action was performed legally and without negligence.  However, it requires the Court to conduct a balancing act between one party’s right to use its property as it desires against another party’s right to be free from damage to the property which stems from the other party’s conduct.¹

Inco argued that the simple existence of nickel particles in the soil did not itself adversely impact or damage the plaintiffs’ property.  It argued that the key question to be answered on appeal was the following: what did the nickel particles actually do to the soil?  The Court of Appeal considered this question and found that while Inco was indisputably responsible for increased metal deposits in the plaintiffs’ soil, the pollution did not interfere with the use of the plaintiffs’ lands.  The Court held that the trial judge had erred by ruling in favour of the plaintiffs in that regard.  A mere alteration in the chemical content of the soil did not itself constitute property damage.  For actual harm or damage to have occurred, the metal deposits in the soil must have either had a detrimental impact on the soil/land itself or on the rights that related to the plaintiffs’ use of the land. 

The appellate Court noted that the trial judge’s statement of the law of nuisance essentially negated the requirement of the plaintiffs to prove that they suffered actual harm or injury as a result of the defendant’s conduct.  The trial judge extended the tort of private nuisance beyond claims rooted in actual injury to claims based on the perception of injury, regardless of the validity of that perception.  The Court of Appeal rightly noted that if the trial judge’s statement of the law of nuisance was correct, a defendant in similar circumstances would be liable in nuisance even if the public concerns relating to injury or property damage were ultimately found to be baseless and without merit.  The Court held that for the plaintiffs to have been successful, they would have needed to show either that the nickel deposits in their soil at any level posed a risk, or that the nickel levels were above healthy levels and therefore constituted a risk to human health.  The Court of Appeal overturned the trial judge’s finding of nuisance as the plaintiffs were unable to demonstrate that either of these risks existed. The Court entertained the possibility that property values in the city had dropped as a result of the public’s concerns about nickel contamination, but it was not willing to extend the tort of nuisance to include damages that resulted from public perception as opposed to actual harm.  While there may have been a claim for health risks, those claims were abandoned early on in the life of the claim.  Perceptions of damage were insufficient. Actual damage was required.²

The Rule in Rylands v. Fletcher

The Court also considered whether Inco was liable under the rule in Rylands v. Fletcher.  The rule imposes strict liability for damages caused to a plaintiff’s property by the escape of a substance “likely to cause mischief” from the defendant’s property.  The Court of Appeal raised ongoing debate on whether there is a need for the continued existence of the rule in Ryland v. Fletcher distinct from negligence, nuisance and statutory liability³.  The rule functions to provide protection from activities of others that present an abnormal risk to its neighbours.  To be captured by the rule, a defendant must be held to have made a non-natural or special use of his land involving a dangerous substance that he brought onto his land.  The substance must have escaped and the plaintiffs must have suffered damage to their property as a result of the escape. 

The trial judge noted that Inco had brought nickel onto land where it was not naturally found.  He also noted that nickel particles had escaped during refinement, a process which he held to be a non-natural and unordinary use of the land. As a result of these findings, the trial judge held that Inco was liable to the plaintiffs under the rule in Rylands v. Fletcher.

However, the Court of Appeal held that the trial judge had erred in applying Rylands v. Fletcher.  The Court found that there was nothing “non-natural” about the refinement of nickel by the defendants.  The characterization of the refinery operation as natural or unnatural must be considered with regards to the “time and place” and the manner in which it was operated. Inco’s refinery was located in a heavily industrialized part of the city and it was operated in a manner that did not create risks beyond those that are incidental to most industrial operations. The Court of Appeal confirmed that it was not the purpose of the rule to impose liability for the intended consequence of activities that are carried out in a reasonable manner and in compliance with all applicable rules and regulations.

Conclusion

This case sets the current tone for nuisance, requiring that actual harm have occurred for a nuisance claim to succeed.  Public perception of harm will not itself create a cause of action in nuisance.  Such an extension would result in a fundamental principle of the doctrine being of no effect - namely, that the plaintiff suffer harm.  Whether the Court of Appeal has the last word on the subject remains to be seen - the plaintiffs are seeking leave to appeal to the Supreme Court of Canada.

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Contaminated Sites: EAB Directs Ministry of Environment to Issue Certificate of Compliance

Tony Crossman, Vancouver

In a recent decision, the BC Environmental Appeal Board (“EAB”) directed the Ministry of Environment to issue a Certificate of Compliance (“COC”) for a property that had been remediated and where the Ministry of Environment had refused to issue a COC because of the potential that the contamination had migrated to nearby properties.  That is, the property owner did not have to investigate and remediate the nearby properties that may have been contaminated in order to obtain a COC.

Background

This case has a long history.  The property was a gas station for many years.  The Ministry issued a pollution abatement order in 1991 and required a preliminary site investigation to determine whether the area where the gas pump islands had been located was contaminated.

In 2002, the property owner carried out independent remediation and then applied to the Ministry for a COC.  The professional who provided the recommendation that a COC be issued provided assurance that the property would not be re?contaminated from the presence of contaminants remaining on the neighbouring properties.

The application for the COC was made in 2007.  The Ministry responded with requests for further information, particularly relating to the neighbouring properties and the extent of contamination.  An appeal to the EAB was filed in 2010 after many years and the COC had still not been issued.

The EAB Decision on those Lands

A preliminary issue tackled by the EAB Panel was whether a “Protocol” is “legally binding” and has the same effect as a “regulation”.  The Ministry argued that that a Protocol is a regulation and, therefore, legally binding.  However, the Panel found that a Protocol was not legally binding, but that a Director of the Ministry has the discretion to require compliance with a Protocol.

In relation to the primary issue, the Panel found that if a COC application is for part of a site and there is a risk that contamination remaining in adjacent areas may migrate to the property, the issue of preventing recontamination of the property is a very relevant consideration.  In this case, the Panel found that the Ministry may issue a COC for part of a contaminated site and that the absence of information about the extent of any contamination remaining on the neighbouring properties is not a basis for rejecting a COC application.  Further, the Panel found that it was unreasonable to decide that further information about alleged contamination in neighbouring properties is “required” or relevant, as long as a professional assurance has been given regarding measures taken to prevent re?contamination, as required in Note 4, Protocol 6.  In this case, the professional gave the assurance.

Although the Panel referred the matter back to the Ministry with directions to issue a COC for the property, the Panel also went on to say that it shared the Ministry’s concern about the need for further investigation and possible remediation of the neighbouring properties.  The Panel found that the Act provided the Ministry with a broad range of powers to address those concerns, including the discretion to issue a site investigation order under section 41 of the Act, to determine an area to be a contaminated site pursuant to section 44 of the Act, and to issue a remediation order under section 48 of the Act.

The Panel also considered what options the Ministry would have if the property became re?contaminated from off?site migration after a COC had already been issued for property.  The Panel found that, under section 60 of the Act, the Director retains the right to exercise any power under Part 4 of the Act, if certain information becomes available or activities occur on a site that may change its condition or use.

Lessons Learned

1. “Protocols” are not “regulations” and are not legally binding.
2. The Ministry cannot refuse to issue a COC on the basis that migration of contamination to neighbouring properties has not been dealt with (if an assurance can be provided that there will not be re?contamination of the COC property).
3. The Ministry has various powers to deal with migrating contamination.

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Reducing Greenhouse Gas Emissions Québec is About to Enforce its Own Cap-and-Trade System

Dany Afram, Montréal

For several years now, the participants of the Western Climate Initiative, including Québec, have been collaborating in order to promote, and eventually implement policies aimed at reducing greenhouse gas (“GHG”) emissions in their respective territories. The most notable project they strived to achieve is undoubtedly the cap-and-trade system, which Québec is set to formally implement on January 1, 2012 when the draft Regulation respecting a cap-and-trade system for greenhouse gas emission allowances (the “Regulation”) published on July 7, 2011 will come into force, making Québec, along with the state of California, the leading jurisdictions in that respect.

That being said, 2012 is a year destined for a transition period as the only mandatory provisions of the Regulation will be the ones regarding the registration of “emitters”, which are defined as persons and municipalities producing at least 25,000 metric tones of CO₂ equivalent per year (excluding the emissions related to the combustion or fermentation of biomass and biomass fuels and on-site transportation activities) at one of their establishments, and operating an enterprise in one of the following sectors of activities:

• Mining, quarrying and oil and gas extraction;
• Electric power generation, transmission and distribution;
• Natural gas distribution;
• Steam and air-conditioning supply;
• Manufacturing; or
• Pipeline transportation of natural gas.

Beginning January 1, 2013, most emitters will have to comply with the core piece of the Regulation. This means that at the end of a compliance period (the first one running from January 1, 2013 to December 31, 2014),  emitters must verify and, for some, cover emissions that exceed the annual threshold of 25,000 metric tones of CO₂ equivalent by providing the Minister of Sustainable Development, Environment and Parks (the “Minister”) with enough emission allowances. Such obligation survives in the event of a change of operator of the covered establishment.

Where an emitter fails to provide the required emission allowances at the end of a given compliance period, he will be subject to an administrative sanction equal to the deduction of 3 emission units or early reduction credits (as defined below) for each missing emission allowance needed to complete the coverage.

There are mainly three different ways for emitters to acquire emission units from the Minister, namely:

• Pursuant to a free annual allocation;
• At an auction organized by the Minister; and
• Following a sale by a mutual agreement.

However, it is also possible for emitters, under certain conditions, to trade emission units with each other. Moreover, certain emitters may be eligible for early reduction credits if they fall under specific requirements of the Regulation. Such initiative constitutes an incentive for emitters to start complying with the Regulation beforehand. The period of eligibility runs from January 1, 2008 to December 31, 2011. Eligible emitters must submit an application to the Minister by December 31, 2012.

Finally, any contravention to the Regulation may result in a fine of up to $250,000 in the case of a legal person or of a person or a municipality operating an enterprise. If the contravention is related to a failure to provide the Minister with prescribed information or documents, then the maximum fine is caped at $50,000. The aforementioned fines are doubled in the case of a subsequent offence to the Regulation.

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In the World of Wind - Setback Shmetback - No Harm, No Foul

Tamara Farber, Toronto

Hanna v. Ontario (Attorney General) was at the centre of some controversy amongst those in the Ontario environmental and renewable energy bar. What seemed to start out as an attempt by a local resident to potentially quell wind power development in his community turned into a full blown assault by Hanna’s legal team on how the Ministry of Environment came up with a policy for setbacks on wind turbine development. Procedurally, the case began as a judicial review challenging various sections of the renewable energy approvals regulation, which sets out the minimum setback requirements for wind energy developments. The regulation, as with most regulations relating to environmental or potential environmental issues, was the subject of public consultation prior to enactment.

The heart of the challenge was that the government failed to abide by its own requirements to “take every reasonable step to ensure the Ministry of Environment’s Statement of Environmental Values (“SEV”) is considered whenever decisions that might significantly affect the environment are made by the Ministry.” Hanna claimed that the Ministry’s SEV required it to use a precautionary approach in decision-making that was protective of human health and the environment. He claimed that the Ministry had no medical studies in support of the recommended 550 m setback requirements for industrial wind facilities (generating power in excess of 50 kW), and that as a result, it did not have sufficient information to make a decision that was protective of human health.

In support of his argument, Hanna called various medical witnesses testifying about the lack of medical support for a 550 m setback.  He was critical of the absence of anyone qualified as a medical expert at the Ministry having reviewed studies available about the setback policy. But perhaps Hanna lost sight of the significance (at least in the Divisional Court’s view) of the public consultation process preceding the passing of the regulation; a process which the court noted Hanna did not participate in. The court found that 8% of the comments received through this process were directed at health issues relating to wind turbines. The court also found that there was some technical basis for the 550 m setback.

Ultimately, the Divisional Court rejected the application, holding that the legislative requirements simply require a minister to “consider” SEVs in decision-making. The legislative initiative itself, being the reduction of greenhouse gas emissions for the purpose of protecting the environment, seemed to qualify as consideration of many of the Ministry of Environment’s components of its SEV. The Divisional Court also noted that a legislative challenge was not the only remedy available: since approvals are required under the regulation, a person could challenge the particular approval itself (a separate hearing before the Environmental Review Tribunal). If the tribunal had concerns about the setback in a particular case, it could revoke the permit or require an increase in the setback.  The Court held that in this case, it was not their call as to whether the approval was proper - redress could have been sought to the Environmental Review Tribunal.

So what’s the next chapter of the story?

• Hanna sought leave to appeal to the Court of Appeal but was denied.
• The Environmental Review Tribunal (“ERT”) released a decision on whether an approval should have been granted in Erickson v. Director, Ministry of the Environment.  Erickson involved an appeal of the Director’s decision to issue a Renewable Energy Approval (“REA”) to Suncor Energy Services Inc. to establish a 20 MW wind facility in Chatham-Kent (known as the Kent-Breeze Project).  The Project was one of the first approved under the Green Energy Act, 2009.  The appeal was sought by Chatham-Kent Wind Action Inc. and Katie Brenda Erickson on the ground that the Project would “cause serious harm to human health”, a statutory test set out in s. 142.1 of the Environmental Protection Act.  During the course of the hearing, the ERT heard evidence from more than two dozen expert witnesses on the subject of potential harm or unknown harms from wind turbines.  The ERT reasoned as follows:

1. Not enough evidence to support claim for serious harm to human health

The parties in the Erickson case agreed that the Project would not cause direct impacts to human health, such as hearing loss. The focus of much of the appellants’ case was on indirect impacts.    The ERT found that the statutory test for serious harm includes both direct and indirect impacts and that the onus of proof was on the appellants.   

The issue was whether indirect impacts would be caused at a level that met the “serious harm to human health” threshold, as the appellants argued.  The Tribunal noted as follows: “What needs to be shown here, given the wording of the legal test, is that the effect is being caused by the Project, even if the exact mechanism is unclear.”  On whether the appellants met the legal test, the Tribunal noted:

[The appellants] provided evidence that the Tribunal finds to be exploratory in nature, even if given significant weight…  It is, therefore, no surprise that the legal test, which requires proof of harm, has not been satisfied when the applicable scientific evidence is in such an early stage of development. 

Nevertheless, the ERT was careful to note that “the science in this area is evolving and it is hoped that future studies will shed additional light as to possible impacts on human health.”

In addition to noise, the ERT concluded that there was insufficient evidence for a finding that serious harm to human health would occur due to tower collapse, blade failure/throw, ice fall/throw and shadow flicker.

2. Prediction, Measurement or Assessment of Sound from the Facility

The appellants called evidence about challenges and uncertainties associated with predicting, measuring and assessing sound.  The ERT concluded that the appellants failed to show how these uncertainties would cause serious harm to human health.  The appellants were able only to demonstrate that predictions, measurements and assessments will not be completely accurate.

3. Compliance with the MOE’s Statement of Environmental Values (“SEV”)

The Ministry of Environment’s SEV can play an important role in informed environmental decision-making.  The appellants argued that the approval granted in this case did not comply with the MOE’s SEV, in particular the precautionary wording. The Director testified about the role of precaution in his decision-making process.  The ERT found that “based on [the Director’s] testimony, the tribunal has some concerns about the Director’s understanding of the role and applicability of the [precautionary] principle…  The impression left by some of the Director’s comments is that more work should be done within the MOE on putting the precautionary principle into practice.”  Ultimately, however, the ERT found:

… the appellants have not proven that serious harm will be caused with reference to the approval’s alleged non-compliance with the SEV.  Rather, they have simply raised valid concerns about the process by which the application was assessed in light of the SEV.  This is not enough to satisfy the section 145.2.1 test and provide jurisdiction to the Tribunal to make changes to the approval decision.

The ERT considered the appellant’s arguments and experts on the issue of whether wind turbines cause serious harm to human health. They concluded that “the evidence shows that there are some risks and uncertainties associated with wind turbines that merit further research”, just not enough to satisfy the steep burden on the appellant in terms of overruling the approval granted to Suncor. 

Industry experts believe that this burden will never be met given (a) the number of studies already conducted in the UK and Europe showing no serious health effects and (b) turbine setback requirements in other jurisdictions are, in many cases, significantly closer to receptors than the current Ontario setback distance. 

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Recent BC Decision Limits Authority of DFO in Development Near Water

Tony Crossman, Vancouver

A recent decision of the BC Court of Appeal confirms that the Federal Department of Fisheries and Oceans (“DFO”) does not have authority over, and does not need to approve, development near water which does not have a harmful effect on fish habitat.  Nor does DFO need to be consulted, nor do they have the authority to require changes to development near water, if there is no harmful effect on fish habitat.

This is an important decision for developers in BC because, up until this decision, DFO had been given de facto control over developments near water as part of the planning and development process.

Of course, if there is a harmful effect on fish habitat, then DFO has authority and an Authorization is required in order to be in compliance with the Fisheries Act.

Background

Mr. Yanke proposed to build a house on his lot near Shuswap Lake, in the City of Salmon Arm, BC.  The lot was within the “riparian assessment area” as provided for in the BC Riparian Areas Regulation.  The house was to be built 15 metres from the average high water mark of the lake.  That Regulation sets out how development can take place within a riparian assessment area.

Mr. Yanke retained a qualified environmental professional, as required by the Regulation, whose professional opinion was that the development, while within the riparian assessment area, would not result in the harmful alteration, disruption or destruction of fish habitat (“HADD”).

The City of Salmon Arm had a practice to defer to the BC Ministry of Environment (“MOE”) and DFO for approvals of developments near water.  This was based on an administrative agreement between DFO, MOE and the Union of British Columbia Municipalities, being the “Inter governmental Co operation Agreement Respecting the Implementation of British Columbia’s Riparian Areas Regulation” and a provincial guide book called Riparian Areas Regulation Implementation Guidebook.  The practice had developed that, even though there was no harmful effect on fish habitat (a HADD), the City would defer to the MOE and DFO for approval as a pre condition of development in riparian areas.  This was even if the qualified professional had assessed that the development would not be a HADD.

What the Court Said

The BC Court made it clear that DFO does not have authority for developments in the riparian area where there is not a HADD.  The Guidebook and agreements had caused confusion and were misleading in suggesting that DFO had jurisdiction.  The Court was clear that the Guidebook and the administrative agreement did not have the force of law.  Rather, the BC Riparian Areas Regulation was the law to be followed.

Comment

This decision highlights the problem faced by many developers in BC where municipalities require de facto approval by DFO (and MOE) of projects near the water.

The Court made it clear that, if there is no harmful effect on fish habitat, DFO does not have authority over such a development.  DFO’s involvement is limited to receiving notice of the development, as required by the Riparian Areas Regulation.

This decision will assist developers and municipalities alike in clarifying the process and confirming that DFO does not have a role in regulating those developments which do not have a harmful effect on fish habitat.

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What's Happening at Miller Thomson

On May 18, MT presented a complimentary breakfast seminar in Vancouver on green building problems and contract issues.  Topics discussed by Charles Bois, Tony Crossman, Sarah Hansen and Owen Pawson included: contracting for green buildings; lessons from the “green trenches”; and carbon taxes, carbon credits and green buildings.

On May 19, MT took part in VerdeXchange's efforts to drive sustainable economic growth at their international forum in Toronto.  MT is a proud sponsor of VerdeXchange Canada which presents Environmental Sustainability & Economic Growth: From California to Toronto in Toronto June 5 and 6 at the Allstream Centre, Exhibition Place. VerdeXchange is a Los Angeles based international conference with the mission of building a community of sustainability leaders from across all sectors of the economy including finance, technology (energy, waste, water, transport, buildings), business, infrastructure, industry, and government.

On May 25, Tamara Farber spoke at the 4^th Brownfield Redevelopment Course on the issue of Regulatory requirements for brownfield redevelopment in Ontario.

On June 8, Aaron Atcheson spoke on “Environmental Considerations on Energy and Infrastructure Projects” at the London Club, in association with the Ontario Bar Association.

On June 13, Teresa Meadows chaired the Alberta Chamber of Resources Environmental Forum “When Bad Things Happen to Good Companies: Lessons Learned and Best Practices in Incident Response” in Calgary.

Sandra Gogal co-chaired the Ontario Mining Forum workshop and spoke on “Developing an Impact and Benefit Agreement” on June 15 in Thunder Bay.

On June 29, MT congratulated Tony Crossman and Teresa Meadows, contributing authors to “The Law of Climate Change in Canada”, which was recently awarded the Walter Owen Book Prize. The Walter Owen Book Prize, awarded by the Foundation for Legal Research, is designed to recognize excellent legal writing and to reward outstanding new contributions to Canadian legal literature that enhance the quality of legal research in this country.  The Law of Climate Change in Canada is the first and only resource to provide an in-depth description and analysis of the complex and ever expanding array of domestic and international laws and initiatives addressing climate change in Canada. 

Tony Crossman and Sarah Hansen spoke on “Winning Advocacy Skills: Tips and Techniques for Appearing Before an Administrative Tribunal” at the CBA Canadian Legal Conference & Expo in Halifax from August 14 to 19.

On October 21 and 28, Teresa Meadows presented "Managing Liability Associated with Storm Drainage: Trends, Traps and Tips from the Trenches" for the Lorman seminar "Current Issues in Storm Drainage" in Edmonton and Calgary, respectively.

On October 28, Tony Crossman chaired a panel on environmental enforcement at the NEERLS/Department of Justice Annual Meeting in Ottawa.

Tony Crossman and Sarah Hansen are co-chairing a course on "Environmental Law: Managing Risk" hosted by the BC Environment Industry Association on November 16-17 in Vancouver.

On November 21, Teresa Meadows will present a three day course in Edmonton, "Understanding Environmental Regulations in Alberta".  Teresa will present a similar course on environmental regulations in Manitoba on January 25, 2012.

On January 31, Teresa Meadows and Charles Bois will present "An Overview of the Regulatory Framework Regarding Water Usage and Disposal in Shale Gas Recovery" at the Canadian Institute Conference "Oil & Gas Water Management Strategies".

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