Canada: Court Of Appeal To Hear Appeal By City Of Kawartha Lakes

On November 28, 2012, the Court of Appeal granted the City of Kawartha Lakes leave to appeal from the Divisional Court's decision dismissing an appeal from the Environmental Review Tribunal. This case raises important issues on the ability of the MOE to issue an order to an innocent property owner requiring that owner to clean-up contamination emanating from a neighbouring property and the principles of fairness and the polluter pays.

Background

Several hundred litres of furnace oil leaked from the basement of a privately owned property in the City of Kawartha Lakes. The spilled furnace oil entered the City's municipal storm sewer system and was being discharged into Sturgeon Lake. A Provincial Officer issued an order to the property owner requiring the owner to eliminate any adverse effects and restore the natural environment.

When the owners' insurance coverage had reached its limits and the owners advised they did not have the financial resources to complete the clean-up, a Provincial Officer issued an order to the City requiring the City to take all reasonable steps to prevent the discharge of contaminants from its own property and to remediate its own property. The Director confirmed the order with some minor modifications.

Environmental Review Tribunal Decisions

The City appealed the Director's order to the Environmental Review Tribunal. The ERT issued two important decisions. The first determined that the issue of fault was not relevant, given the wording of the Environmental Protection Act, and, therefore, did not allow the City to lead any evidence on the issue of fault. It was acknowledged by all parties that the City was not at fault; the City was an innocent property owner. The City wanted to lead evidence of fault to make its case on the issue of "fairness".

On the appeal of the merits, the ERT upheld the Director's order requiring the City to clean-up the contamination. This was the second important decision issued by the ERT, which found that the legislation specifically contemplated making innocent owners initially responsible for clean-up and prevention of contamination. Any complaint about fairness was with the legislation.

Divisional Court Decision

The City appealed the ERT's decision to the Divisional Court on a question of law. In a decision released on May 28, 2012, the Divisional Court upheld both decisions of the ERT. The Court held that the ERT did not err in refusing to permit evidence of fault since the ERT is not required to determine fault under the legislation.

On the merits of the order, the Divisional Court upheld the ERT's decision that the legislation is based on "owner pays" rather than "polluter pays". The court agreed with the ERT that the complaint is with the legislators that drafted the legislation and not the statutory decision makers acting in accordance with the mandate given under the legislation.

Issues on the Appeal

The appeal to the Court of Appeal raises important issues regarding the principle of fairness established many years ago by the ERT and Divisional Court. Is "fairness" dead? Does fault not matter? How broadly can the MOE cast its net when looking for someone to clean-up contamination?

It is interesting to note that the Divisional Court in its reasons stated that the City was seeking to have the ERT consider evidence about the fault of the MOE itself, among others. The consequence of these decisions is that the MOE can use its powers under the legislation to order an innocent property owner to clean-up contamination even if the MOE has some fault in the first place. The ERT will not even consider evidence of that fault and will not determine what is fair in such circumstances. The innocent property owner is left to pursue a remedy in an often cumbersome and time consuming civil action, with no guarantee of recovery at the end.

As is usual, the Court of Appeal gave no reasons for its decision granting leave to appeal.

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