Ontario’s Ministry of the Environment targeted “the most convenient victim” in its chemical contamination clean-up order against the directors of a now-insolvent company, say lawyers who represented company directors.
Ten corporate officers and directors of Northstar Aerospace Canada Inc., a company that manufactured helicopter transmission devices before going bankrupt, paid a $4.75-million settlement in October 2013 to be released from a ministry’s environmental clean-up order.
According to Dianne Saxe, one of the lawyers for the directors, the Ministry of the Environment admitted Northstar did not cause the chlorinated solvent plume (TCE) and chromium contamination on the company’s Cambridge, Ont., site, but it still held the directors personally liable for the environmental damage and clean-up operation.
Speaking at the Ontario Bar Association’s Institute Conference on Feb. 6, Saxe said she was “outraged” by a policy that applied retroactive liability on innocent individuals and called for review of the ministry’s site contamination liability laws.
The TCE contamination is “historic,” according to Saxe, who noted whether the damage predated the directors wasn’t a factor in the ministry’s order.
“All of this was imposed on the directors of a company who did nothing wrong,” she said. “There is no level at which this is fair.”
Northstar plummeted into financial troubles following U.S. President Barack Obama’s election, which saw the war in Iraq wind down and the need for helicopter transmission parts decline. The company filed for bankruptcy in 2012.
But for 10 of its directors, the end of Northstar was the beginning of a legal battle with the Ministry of the Environment for a fault they say was not theirs to rectify. The contamination did not occur under the directors’ watch and they could not have prevented it, said Saxe.
If imposing no-fault liability is fair game, there’s no saying who else could be implicated, Saxe added.
“What about the people who work [in the company]? What about all the people who sold the arsenic?” she asked. “If it’s fair to impose retroactive liability, where do you stop?”
“We don’t have a sensible public discourse about how to make this work. We’re not having a sensible public discourse about how should we pay for things where the rules have changed,” she continued. “And instead, the government is taking the approach of pouncing at the most convenient victim, which at the moment tends to be certain, totally unpredictable officers and directors.”
The current practice will also diminish Ontario’s allure as an investment destination, she said.
“People will not put their personal assets at risk if there’s nothing they can do to protect themselves and they’ll be punished without fault.”
The MOE wanted the Northstar directors to set aside funds from the company’s remaining reserves after it filed for bankruptcy, although Saxe’s co-counsel Barry Weintraub said such a move would have been considered an illegal prioritization of creditors in the bankruptcy proceedings.
According to Weintraub, the ministry’s practice is no different from ordering homeowners or tenants of a residential building to pay for environmental damages associated with their location despite their lack of role in the contamination. The only difference, Weintraub said, is this wouldn’t be “politically popular.”
Recently, EcoJustice asked the environmental commissioner of Ontario to review its site contamination liability rules. The current system at times allows polluters to get away without repercussions and hold innocent parties to foot the bill for clean up, an EcoJustice report said.
“Although the [Environmental Protection Act] allows the MOE to collect financial assurance from potential polluters to ensure that future costs and expenses of remediation are covered, these requirements are almost entirely discretionary and do not require that potential polluters provide an amount that will cover the full costs and expenses of remediation,” the report reads.
“As a result of these problems, Ontarians and third parties who did not themselves cause contamination are left footing the bill for the clean-up of contaminated sites when polluters are unwilling or unable to cover the full costs and expenses of remediation.”
The report recommended, among other things, the MOE focus on pollution prevention and strengthen the application of the “polluter-pays” principle in Ontario.
According to Ministry of the Environment spokeswoman Jennifer Hall, “the ministry stands behind the ‘polluter pays’ principle.”
“We expect companies and their directors to uphold environmental protection as part of their corporate responsibilities,” she said in an e-mail to Law Times. “The ministry encourages companies to account for their environmental costs through methods such as obtaining the appropriate environmental liability insurance or setting aside resources for proper clean up.”
The Northstar case was the first time the ministry held corporate directors and officers of a bankrupt company personally liable for environmental clean up, she said.
“Northstar Aerospace’s bankruptcy rendered the Cambridge operation an orphan site. The ministry has taken over the responsibility for ensuring the continued operation of the mitigation and monitoring programs. All groundwater and air remediation work will continue uninterrupted,” she added.