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Pandora’s box of environmental litigation

|Written By Julius Melnitzer

The otherwise unremarkable town of Port Colborne may soon become remarkable - at least in the annals of environmental litigation.

‘This is certainly the first case of its kind, but the common law doctrines we rely on are well established,’ says Kirk Baert.

Port Colborne and property values there are the subject of a $750 million class action brought by thousands of residents after Ontario’s Ministry of the Environment found high levels of nickel contamination in the area in 2000. They say that nickel oxide emitted by Inco between 1918 and 1984 caused the contamination.

And the discovery of that contamination, they allege, led to a devaluation or at least a retardation of property values. If they succeed, the case could become the Pandora’s box of Canadian environmental litigation.

“Pearson could have a very significant impact in the environmental area,” says Eric Gillespie of Cunningham & Gillespie, who represents the plaintiffs as co-counsel with Koskie Minsky’s Kirk Baert.

“The central issue is whether the announcement of contamination negatively impacted property value over a large area. This type of situation has occurred in a number of other Canadian communities and it is conceivable that it will occur again.”

What’s unique about Pearson is the absence of a big bang.

“To be sure, each case turns on its own facts, but the typical case is one like the propane explosion in Toronto where everyone can point to a single incident as the cause,” says Larry Lowenstein of Osler Hoskin & Harcourt who, with co-counsel Alan Lenczner of Toronto’s Lenczner Slaght Royce Smith Griffin, represents Inco.

Pearson is more like the Chinese water torture, and that’s what potential defendants find chilling. After all, the contamination is said to have begun almost a century ago and ended some 24 years ago when the Inco plant closed, only to have the issue rear its head some 16 years later in the course of the MOE’s investigations.

The trial, which was scheduled to being this fall, has been postponed to October 2009, when it is expected to last two months. But the case has had a tortuous route from the outset.

To begin with, Justice Ian Nordheimer of the Superior Court refused certification to the class in 2002, primarily because a class proceeding was not the “preferable procedure,” as required by the Class Proceedings Act. Two years later, the Divisional Court upheld his ruling.

On further appeal, however, the Court of Appeal in 2006 came down in favour of what it called “a somewhat more liberal approach” to the certification of class proceedings.

In its reasons, the court pointed out that the plaintiffs had abandoned their health claims. This reduced the class from 20,000 to 8,000 members.

While the claim as originally framed would not have advanced judicial economy as “the individual claims of injury to health and related claims would dwarf the resolution of the common issues,” this was no longer the case.

Adjudication of individual claims might still be required to determine individual damages, but in the context of property damage only, this consideration did not override the existence of substantial common liability issues that were appropriate for resolution by way of class proceeding.

Inco’s lawyers had pointed out that alternative legal remedies to class actions existed because the MOE had required Inco to conduct a “Community Based Risk Assessment” to establish that the health of local residents was not at risk, and Inco had done so.

But the Court of Appeal observed that this process did not deal with the specific complaints of the amended class action because it failed to address monetary claims for reduced property values.

At the very least, then, Pearson provides a clear precedent that class proceedings claiming property damage from a single source stand a good chance of certification even absent a big bang.

Also of considerable interest to the business community are the court’s statements about “behaviour modification” as an element of class actions generally.

Nordheimer had ruled that certification was not required for behaviour modification reasons because the MOE was already monitoring the situation and Inco had established the CBRA. But the Court of Appeal disagreed.

“Modification of behaviour does not only look at the particular defendant but looks more broadly at similar defendants, such as the other operators of refineries who are able to avoid the full costs and consequences of their polluting activities because the impact is diverse and often has minimal impact on many,” he wrote.

“This is why environmental claims are well suited to class proceedings.”

The court also rejected the argument that certification might make Inco less co-operative.

“I do not agree with the proposition that property owners must abandon their legal rights and their right to be made whole in order to buy the co-operation of a defendant they say has caused widespread harm to the community,” he wrote.

Although the Supreme Court of Canada denied Inco’s application for leave to appeal, Lenczner says the certification is a product of “woolly thinking” on the Court of Appeal’s part.

“It’s nuts,” he said. “How can you expect commerce to operate when companies like Inco who have met all regulatory requirements and caused no health hazard have to put up with the contention that the escalation of house prices was not as robust as it might have been?

Pretty soon people will find companies to blame because the prices in their town haven’t gone up as much as in Toronto.”

Baert counters that the theories behind the plaintiffs’ claim are hardly earth-shaking.

“This is certainly the first case of its kind, but the common law doctrines we rely on are well

established,” he says.

However that may be, Lenczner says Inco isn’t an environmental claim at all.

“If someone sprinkles oxygen over your property, and there’s no health hazard, how is that an environmental claim?” he asks.

What the case is about, Lenczner adds, is the perception of a health hazard.

“The certification talks about the decrease in property values caused by the perception created by the announcement of nickel contamination,” he says.

“But whose perception are we talking about? Shouldn’t you reserve environmental claims for real things, and not just Alice in Wonderland?”'

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