The Ontario Court of Appeal has given plaintiffs a major tool for making polluters pay for off-site contamination. Overturning two previous decisions, it has allowed 8,000 residents of Port Colborne to launch a class action against Inco Limited for lost property value due to nickel oxide contamination that mostly occurred before 1960.
This case, Pearson, sets an immensely important precedent. For one thing, it is the first Canadian case outside Quebec to certify (authorize) a class action for long-term pollution. Class actions are powerful tools because of the huge costs they impose on defendants; most defendants settle once a case is certified. Until now, English Canada's environmental class actions have been restricted to product liability cases (such as delivery of polluted water), or particular disasters (such as a train wreck). The first major attempt to use class proceedings for ongoing pollution was firmly rejected by the Supreme Court of Canada in Hollick v. Toronto, where neighbours sought compensation for nuisance impacts from a landfill. But Pearson has reopened the environmental class action door, at least for certain claims.
Inco operated a nickel refinery in Port Colborne, Ontario, from 1918 to 1984. It emitted tonnes of nickel oxide into the air, most of it before 1960. Much of this nickel oxide settled near Rodney Street, a low-income area just downwind, where Mr. Pearson lives. In September 2000, the provincial Ministry of the Environment (MOE) released a report documenting elevated nickel levels in many Port Colborne properties, especially in the Rodney Street area. (Note: All these properties were allegedly contaminated by Inco's off-site emissions, not by on-site activities of a previous owner. Complaints by subsequent owners about contamination that occurred on site raise somewhat different legal questions.)
Mr. Pearson says that the MOE report had a serious impact on property values in Port Colborne, especially near Rodney Street. The MOE and Inco responded to the report with a Community-Based Risk Assessment (CBRA) and free cleanups of neighbourhood homes. However, the CBRA cleanups are governed by a special "risk-based" criterion for nickel (8000 ppm) that is higher than the generic benchmark applied elsewhere in the province. And unlike in Hollick, where the city had set up a fund to compensate neighbours for nuisance, Inco did not offer the residents any compensation. The residents then decided to sue.
Mr. Pearson started his case by casting a very broad net. He tried to sue Inco, the province, the city, the region and two school boards for a whole range of damages, including actual and potential harm to human health. Nickel oxide is a carcinogen, so the residents were understandably concerned about its health effects. However, both of the lower courts ruled that health claims would make a class action unmanageable. By the time he reached the Court of Appeal, Mr. Pearson had abandoned the health claims. He had also lost or settled all his claims against the province, the city, the region and the two school boards. What was left was his claim against Inco for $750 million in lost property value.
That was good enough for the Court of Appeal. Claims for property value loss in a defined area at a defined time (i.e., after release of the MOE report) are narrow enough, it decided, to be "manageable" in a class action. Although individual assessments of damages may be needed later, there are enough common issues to warrant a consolidated evaluation of Inco's liability. Consider, for example, the following:
* Is Inco the source of all the nickel oxide?
* Is individual testing needed, or can each property in the defined area be considered contaminated?
* Pre-1960, did Inco owe a duty of care to its neighbours not to emit nickel oxide?
* Regardless of the statutes of the day, is Inco strictly liable for the nickel oxide because it was a dangerous substance (Rylands v. Fletcher)?
* Can residents sue now for pollution that occurred so long ago?
The court went out of its way to recognize Inco's record of scrupulous environmental compliance since the MOE was created in 1971. But that doesn't protect the company from the consequences of what it did before.
Inco will now attempt to appeal to the Supreme Court of Canada. If the decision stands, it could open the door to similar lawsuits wherever a smokestack used to stand. It also raises questions far beyond company towns: What about lakes downwind of Inco's Sudbury Superstack that are affected by acid rain? How far will the new liability go? Only time will tell.
Dianne Saxe, Ph. D. is one of Canada's leading environmental lawyers with her own practice in Toronto. For further information, e-mail admin@envirolaw.com.