Post-Midwest: Section 99(2) of the EPA Proves a Powerful Tool

March 14, 2017

Written By Julia E. Schatz, Venetia E.K. Whiting, and Laura J. Freitag

The Ontario Superior Court awarded damages for migration of dry cleaning solvents the defendant corporation spilled between 1960 and 1974 in Huang v Fraser Hillary's Limited, 2017 ONSC 1500 [Huang] under section 99(2) of the Environmental Protection Act (EPA).

Huang is the first application of the statutory cause of action provided under section 99 of the EPA, following Midwest Properties Ltd. v Thordarson, 2015 ONCA 819 [Midwest]. In Midwest, the Court of Appeal found that section 99(2) creates a separate, distinct ground of liability for polluters, regardless of fault or negligence. 

In Huang, the court found liability under section 99(2) and nuisance, but rejected claims grounded in negligence, trespass, and strict liability under Rylands v Fletcher. This expansive interpretation of section 99(2) suggests that, post-Midwest, the statutory cause of action provides a far more robust tool than the common law for plaintiffs seeking compensation for contaminated sites. Huang also suggests we may see an increase in plaintiffs seeking damages for loss or damage incurred from pre-1985 spills.

Background

The plaintiff, Eddy Huang, purchased two adjacent properties in Ottawa in 1978, with the intention of developing them at a later date. When Mr. Huang approached his bank about developing his properties, the mortgage specialist requested a Phase I Environmental Site Assessment (ESA) on the properties. The Phase I ESA confirmed the likely presence of contamination due to the dry cleaning business adjacent to one of the properties, and the subsequent Phase II ESA recommended excavating and disposing of the contaminated soil or the installation of a barrier system. As a result, the bank would not advance Mr. Huang any funds for developing the property and would not renew his existing mortgage.

Mr. Huang sought damages for remedial and expert expenses for the contamination of soils and groundwater at his Ottawa properties, suing Fraser Hillary's Limited (FHL), the adjacent dry cleaning business that had been operating since the 1960s, and David Hillary, the owner of neighbouring residential property on the other side of the dry cleaning business (and the president and sole stakeholder of FHL since 1971), alleging, among other causes of action, liability under section 99 of the EPA.

FHL did not dispute that its dry cleaning solvents contaminated Mr. Huang's properties between 1960 and 1974, at which time FHL purchased new machines which reduced the quantity of solvents used in operations. Neither of the defendants called any evidence.¹

Application of Section 99 of the EPA to Pre-1985 Spills

Section 99 of the EPA provides for a civil cause of action between private parties, allowing recovery of any loss or damage incurred as a result of, among other things, the spill of a pollutant, from the owner of the pollutant and the person having control of the pollutant. Both the "owner of the pollutant" and the "person having control of the pollutant" are defined in relation to the time immediately before the first discharge of the pollutant.

Importantly, section 99 was introduced as part of the "Spills Bill" amendment to the EPA, which added Part X and came into force in 1985. In Huang, FHL argued that the section did not apply retrospectively to the spills that occurred between 1960 and 1974, prior to the Spills Bill (and the statutory right of compensation under section 99) coming into force.

The court made three key findings in respect of the application of the Spills Bill to the contamination occurring between 1960 and 1974:

1. The court held that the application of section 99 to this case does not constitute a retrospective application of the law, because section 99 provides for a right to compensation for a loss or damage incurred as a result of the spills. A law is not retrospective if it only gives effect to prior facts in determining future rights and liabilities, but "does not change anything done in the past."
2. In the alternative, if section 99 does apply retrospectively, then the presumption against retrospectivity is rebutted because section 99(2) is intended to protect the public and not to punish. In particular, section 99(2)'s intent "is that innocent parties be entitled to compensation directly from the polluter."²
3. Even if section 99(2) punishes polluters and, consequently, the presumption against retrospectivity is not rebutted, the court held that the legislature intended for section 99 to apply to historic (pre-1985) spills, as the remedy is not expressly restricted to spills occurring after the Spills Bill came into force.

Ultimately, the court found FHL liable to Mr. Huang under section 99(2) of the EPA as the owner and person having control of the pollutant immediately before the first discharge and awarded $1,632,500 for remediation costs and $201,726.21 for expert costs.

Takeaways

Huang provides a first look into how section 99 of the EPA will be treated post-Midwest and suggests that the statutory cause of action provides a far more robust tool than the common law for plaintiffs "without any requirement of intent, fault, duty of care, or foreseeability,^"3 including for spills occurring before 1985.

Addendum: Since this decision was released, the Superior Court has released an addendum to its reasons for decision in Huang,⁴ emphasizing that the application of section 99(2) of the EPA in this case was not "retroactive".

On March 17, 2017, counsel for the corporate defendant applied to present supplemental submissions on the right to compensation under section 99 of the EPA, in light of the Court of Appeal's 1990 decision, McCann v Environmental Compensation Corp⁵ [McCann]. In McCann, the Court of Appeal made comments in obiter dictum that an alleged spill that took place before the enactment of Part IX of the EPA (which governed spills) could not be the subject matter of a claim.

The court found that it was not clear that McCann applies to this case and refused to hear additional submissions.

We can expect the defendants in Huang to appeal the decision on this basis.

Notes:

¹ Huang, at para 9.

² Huang, at para 97.

Authors