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Statutory Tort

. Midwest Properties Ltd. v. Thordarson

In Midwest Properties Ltd. v. Thordarson (Ont CA, 2015) the Court of Appeal compares a statutory tort [here for compensation for spills under s.99 of the EPA] and the common law of tort on the method of calculating damages. The court favours a statutory textual approach over a traditional common law one:
(ii) Failure to Prove Damages

[56] The trial judge also dismissed, at para. 23, Midwest’s s. 99(2) claim on the ground that it “did not introduce evidence of damage or loss pursuant to section 99 of the EPA, such as actual loss in property value or its inability to use its property or operate its business on its property, or business losses.” The respondents assert three arguments in support of the trial judge’s conclusion on damages.

[57] First, the respondents argue that any damages awarded to Midwest should be measured by the diminution in the value of Midwest’s property rather than by the cost of remediation.

[58] The respondents note that, while Mr. Vanin and Mr. Tossell suggested that there would be negative financial impacts from the contamination, neither was qualified as an expert in mortgages or property valuation. Midwest also did not tender any appraisal reports or property valuations. Therefore, the respondents submit that there is no basis to conclude that the value of Midwest’s property has been adversely affected, and accordingly, no basis on which to award damages.

[59] I would not give effect to these arguments.

[60] There is a significant debate in the case law about whether diminution in value or restoration costs is the appropriate measure of damages in cases of environmental harm: see Faieta et al., at p. 293.

[61] At common law, the traditional view was that damages for any type of injury to property should be measured by the diminution in value caused by the injury: see Hosking v. Phillips (1848), 154 E.R. 801, 3 Exch. Rep. 168 (Eng. Ex. Ct.). More recently, courts have awarded damages based on restoration costs, even if those costs exceed the amount of the decrease in property value: see Katherine M. van Rensburg, “Deconstructing Tridan: A Litigator’s Perspective” (2004) 15 J. Envtl. L. & Prac. 85, at p. 89; see e.g. Jens v. Mannix Co. (1978), 1978 CanLII 1962 (BC SC), 89 D.L.R. (3d) 351 (B.C.S.C.); Horne v. New Glasgow, 1953 CanLII 335 (NS SC), [1954] 1 D.L.R. 832 (N.S.S.C.).

[62] The restoration approach is superior, from an environmental perspective, to the diminution in value approach. Since the cost of restoration may exceed the value of the property, an award based on diminution of value may not adequately fund clean-up: Bruce Pardy, Environmental Law: A Guide to Concepts (Markham, ON: Butterworths, 1996), at p. 223.

[63] In its Report on Damages for Environmental Harm, the Ontario Law Reform Commission canvassed a number of methods for calculating damages. Ultimately, it recommended the adoption of methodologies, like the restoration approach, that “best ensure that the environment is returned to its pre-contaminated condition”: Ontario Law Reform Commission, Report on Damages for Environmental Harm (Toronto: Ontario Law Reform Commission, 1990), at p. 56. The Commission concluded, at p. 55, that “the ultimate goal of the courts should be to ensure that the environment is put in the same position after the mishap as it was before the injury.”

[64] Two relatively recent cases reflect the trend toward awarding remediation damages. In Tridan Developments Ltd. v. Shell Canada Products Ltd. (2000), 35 R.P.R. (3d) 141 (S.C.), aff’d (2002), 2002 CanLII 20789 (ON CA), 57 O.R. (3d) 503 (C.A.), leave to appeal refused, 177 O.A.C. 399 (note), a property neighbouring a gas station was contaminated with gasoline after a leak in a fuel line. Since the defendant polluter admitted liability, the only issue at trial was the assessment of damages. The plaintiff sought to recover the cost of returning its property to “pristine” condition. It also claimed “stigma” damages measured as the diminution in the value of its property. The defendant argued that the plaintiff had suffered no damages due to the spill, or that alternatively, its damages should be limited to the cost of remediating the property to the MOE’s minimum standards. The trial judge awarded damages as requested by the plaintiff. On appeal, this court overturned the stigma damage award but upheld the trial judge’s decision to order damages for the cost of future remediation.

[65] The respondents argue Tridan does not apply because the defendant in that case admitted it was liable. There is no merit in this argument. The damages analysis in Tridan is relevant regardless of whether liability was admitted or found by the court.

[66] The second case is Canadian Tire Real Estate Ltd. v. Huron Concrete Supply Ltd., 2014 ONSC 288 (CanLII), 88 C.E.L.R. (3d) 93. It also involved PHC contamination by a neighbour. Justice Leitch ordered the defendant to pay $3.6 million, which was the estimated cost for future remediation, as damages for nuisance, negligence, trespass and strict liability. She found that this award would place the plaintiff in the position it was in prior to the tortious conduct.

[67] Neither Tridan nor Canadian Tire involved a claim under s. 99(2) of the EPA. There is no reported case where a court has awarded damages for the cost of future remediation under this section. Nonetheless, in my view, awarding damages under s. 99(2) based on restoration cost rather than diminution in property value is more consistent with the objectives of environmental protection and remediation that underlie this provision.

[68] This approach to damages reflects the “polluter pays” principle, which provides that whenever possible, the party that causes pollution should pay for remediation, compensation, and prevention: see Pardy, at p. 187. As the Supreme Court has noted, the polluter pays principle “has become firmly entrenched in environmental law in Canada”: Imperial Oil Ltd. v. Quebec (Minister of the Environment), 2003 SCC 58 (CanLII), [2003] 2 S.C.R. 624, at para. 23. In imposing strict liability on polluters by focusing on only the issues of who owns and controls the pollutant, Part X of the EPA, which includes s. 99(2), is effectively a statutory codification of this principle.

[69] Further, a plain reading of s. 99(2) of the EPA suggests that parties are entitled to recover the full cost of remediation from polluters. Pursuant to s. 99(2)(a), a party is entitled to recover all “loss or damage” resulting from the spill. Section 99(1) provides that “loss or damage” includes personal injury, loss of life, loss of use or enjoyment of property and pecuniary loss, including loss of income. Section 99(2)(b) provides that a party has a “right to compensation for all reasonable cost and expense incurred in respect of carrying out or attempting to carry out an order or direction under this Part, from the owner of the pollutant and the person having control of the pollutant.” In my view, under either part of s. 99(2), polluters must reimburse other parties for costs they incur in remediating contamination.

[70] In summary, restricting damages to the diminution in the value of property is contrary to the wording of the EPA, the trend in the common law to award restorative damages, the polluter pays principle, and the whole purpose of the enactment of Part X of the EPA. It would indeed be a remarkable result if legislation enacted to provide a new statutory cause of action to innocent parties who have suffered contamination of their property did not permit the party to recover the costs of remediating their property, given the EPA’s broad and important goals of protecting and restoring the natural environment.

[71] The second argument advanced by the respondents is that compensation under s. 99(2) is dependent upon the establishment of an actionable nuisance, which requires proof of physical injury to the land or substantial interference with the use or enjoyment of the land in order to claim damages. In support of that position they rely upon the decision of this court in Hollick v. Metropolitan Toronto (1999), 1999 CanLII 2894 (ON CA), 46 O.R. (3d) 257 (C.A.), aff’d 2001 SCC 68 (CanLII), [2001] 3 S.C.R. 158.

[72] According to the respondents, there was no such evidence before the court. They say the fact that certain contaminants exceed MOE standards is not evidence of physical harm to the property. They also argue that there was no evidence tendered of health risks, impacts to individuals at Midwest’s property, or interference with potable water.

[73] I am not persuaded that, in order to succeed in its claim under s. 99(2), Midwest is required to prove an actionable nuisance. As noted above, the purpose of enacting s. 99(2) was to provide a flexible statutory cause of action that superimposed liability over the common law. In so doing, the Legislature recognized the inherent limitations of the common law torts of nuisance and negligence. This new cause of action eliminated in a stroke such issues as intent, fault, duty of care, and foreseeability, and granted property owners a new and powerful tool to seek compensation.

[74] The interpretation urged upon us by the respondents, that under this new cause of action a plaintiff could only recover if it could first prove that the defendant’s conduct constituted a nuisance at common law, is entirely incongruous with the purpose of the enactment of s. 99(2). The Legislature is presumed to know the law. If the Legislature wanted to define the new cause of action in a manner consistent with the existing common law of nuisance it could have done so. It did not.

[75] I am also not persuaded that Hollick is authority for the proposition that proof of common law nuisance is a prerequisite for a claim under s. 99. The issue in that case was whether a putative class action should be certified. The plaintiff had pleaded nuisance, negligence, Rylands v. Fletcher, and s. 99 of the EPA. While Carthy J.A. indicated that “No one of these claims can be established unless a nuisance is proved”, in my view, this comment should be taken as indicating that the claims in the proceeding were dependent on the proof of an underlying “nuisance” in the colloquial sense.

[76] In Hollick the court was not dealing with the merits of a s. 99 claim, but instead considering whether there were sufficient common issues to justify class certification. Ultimately, the court concluded that there were not because there was not sufficient commonality on the issues relating to the source and impact of the pollution. In contrast, in this case there is no issue that there was a spill of a pollutant as that term is defined in s. 91(1) and that the spill caused an adverse effect by, among other things, causing damage to property as defined in s. 1(1).

[77] Third, the respondents argue that Midwest has not demonstrated that its property was clean when it was purchased in December 2007. They say that the time at which the property was contaminated is relevant to the application of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. The respondents submit that Midwest has an obligation to establish that the contamination occurred within the two year limitation period and that, in the case of an ongoing contamination, they are only responsible for pollution that is proven by Midwest to have occurred during that period (i.e. two years).

[78] I would not give effect to this argument. First, the respondents ignore s. 17 of the Limitations Act, 2002, which provides that “There is no limitation period in respect of an environmental claim that has not been discovered.” Here there is no question that Midwest commenced its action within two years of buying the property and discovering the contamination.

[79] Second, the respondents are not absolved from liability under s. 99(2) on the basis that Midwest cannot state what level of contamination occurred before and after they purchased the property. There is no requirement under the EPA for them to do so. Further, the respondents should not be able to use their lengthy history of pollution and non-compliance as a shield to limit the amount of damages they now owe.

[80] For the foregoing reasons, I would find that the trial judge erred in law in her conclusion that Midwest had not proven recoverable damages under s. 99 of the EPA. As noted above, there is really no dispute on the evidence regarding the costs of the remediation. Midwest led expert evidence that the reasonable costs of remediating its property would be $1,328,000 and the respondents, while challenging that expert evidence, did not lead positive evidence on the costs of remediating Midwest’s property. In my view, the future remediation costs for Midwest’s property are recoverable and Midwest is entitled to judgment for the full amount of its estimated costs, being $1,328,000.
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