The Ontario Court of Appeal has ruled that the Ministry of the Environment (MOE) can’t claim priority over secured creditors by ordering insolvent companies to clean-up historic contamination.
The October 3, 2013 appeal ruling upheld Justice Geoffrey Morawetz’s decisions in the 2012 cases of Nortel and Northstar, both of which had millions of dollars’ worth of site contamination that needed to be remediated, even though the companies were no longer in business.
Now, taxpayers will likely foot the bill for the remaining remediation.
In 2004, Northstar Canada discovered the presence of trichloroethylene (TCE) and hexavalent chromium in its site groundwater. The company could not afford to comply with the MOE cleanup orders, and as a result, the company applied for and obtained protection under the federal Companies’ Creditors Arrangement Act (CCAA) on June 14, 2012.
According to court documents, in the case of Northstar Canada, the court rejected the MOE’s priority claim because the province had taken over the cleanup after Northstar Canada’s bankruptcy.
As Nortel was involved in its own insolvency process in 2009, the company spent about $28 million to remediate chlorinated solvent contamination on properties it has long since sold. But the cleanup wasn’t complete.
At the time, Nortel had no outstanding orders from the MOE to remediate its properties. It wasn’t until Nortel filed for CCAA protection in January 2009 that the MOE issued remediation orders.
In court documents, Nortel estimated there was an additional $18 million worth of remediation to be done.
Initially, the court had allowed the MOE priority claim in the Nortel case because the province had not taken over the cleanup.
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