Damages for Contaminant Migration – Engineers & the Law

From the March-April 2016 print edition, page 32.

A recent decision of the Ontario Court of Appeal — Midwest Properties Ltd. v. Thordarson, 2015 ONCA 819 — could impact the way environmental cases are argued. Environmental consultants asked to provide expert evidence should be aware of the evidence called in the case, and how it was considered by the Court.
As with many contaminated land cases, a dispute arose between two landowners. The “source property” was owned by Thorco, and the adjacent land was owned by Midwest. Midwest, the plaintiff, conducted intrusive subsurface testing, which revealed that contamination was present in excess of provincial standards on both Thorco’s and Midwest’s land, and that the contamination had migrated from Thorco’s land. Midwest sued Thorco (and its principal, Mr. Thordarson) under typical heads of tort liability, and statutory liability under s. 99 of the Ontario Environmental Protection Act (EPA). So far, the story is pretty typical of contaminated land cases.
The long history of the regulator with the property, however, and Thorco’s knowledge and disregard for prudent chemical storage, were atypical. Thorco had not only been ordered years ago by the Ministry of Environment (as it then was) to remediate Thorco’s land, but had been convicted for failing to comply with Ministry orders to do so. From 1988 to 2011 Thorco was in a state of almost constant breach of Ministry permits and compliance orders.
Relying on the statutory compensation scheme in the EPA, the trial court awarded damages equal to the cost to remediate — the entire cost.
Expert evidence was called by Midwest as to the estimated cost to remediate Midwest’s land. It is notable that Thorco did not call conflicting evidence on the remedial costs, but instead relied upon its expert to suggest that estimates were hard to predict and unreliable because there was insufficient data.
Thorco argued that the award of damages should not exceed the property value and cautioned the court that if damages were awarded while Thorco was still under compulsion to remediate its and Midwest’s land, Midwest might be awarded the costs but it may never have to actually spend the money on remediation. If that were to happen, Thorco would effectively have to pay twice. The Court of Appeal rejected that argument, and held that the statute was concerned with the environment and putting the property back to its prior state, before the contamination. The fact that there was an existing Ministry order requiring the defendant to remediate the neighbour’s land, did not preclude an award of damages.
Expert evidence was also called on:
• the impact that the contamination would have on financing and property value. This evidence was not given by bankers or appraisers, but by professional engineers who had estimated the remedial costs. The evidence was essentially commentary from consultants that the contamination would have an effect on financing.
• the fact that contamination on the Midwest property presented a health risk. This evidence was not given by medical, risk assessor or toxicological professionals, but by the same environmental consultants. It was based upon the findings of subsurface exceedances of groundwater samplings, but no indoor air sampling. No risk assessment evidence is referenced in the trial decision.
Damages were awarded to Midwest even in the absence of hard data establishing the property condition at the time of purchase.
Thorco as well as the principal, Thordarson, were held to be jointly and severally liable for remediation costs of $1.3 million, and an additional $50,000 in punitive damages. It was a complete reversal of the trial judge’s decision.
Consultants should know:
» The court held that the measure of damages in contaminated land cases involving migration to a neighbouring property could be remediation costs even if those costs exceeded the property value. Many residential sites or smaller sites, especially in rural areas, can easily have restoration costs that exceed the property value.
» Damages were awarded before the remediation was undertaken and without any guarantee that the plaintiff would use the money to remediate its land. As with any award of damages, the award in this case came with no strings attached. As is known from other court decisions in Ontario, the Ministry of Environment and Climate Change is under absolutely no legal obligation to pursue the plaintiff to undertake the remediation. It can continue to insist that the defendant undertake all the work under the order.
» The appeal decision does not address the practical question of how the plaintiff — Midwest — would remediate their own site if Thorco continued not to remediate the source. Would Midwest be entitled to sue again in the event of re-contamination? If Midwest erected a barrier wall to effectively divert the contamination elsewhere, would it open itself up to liability to any downstream owner newly affected by the diverted contamination?
This decision is likely to have repercussions. Plaintiffs may well now favour pursuing civil damages under s. 99 of the EPA as opposed to claims in negligence or nuisance. Seeking remediation costs  will likely also increase the potential damages awarded to many plaintiffs, especially ones who own smaller properties.
Consulting engineers should be wary, though, of professing expertise in areas where they might not have the ability to provide opinion evidence. The court leaned to favouring the plaintiff in this case, no doubt influenced by the behaviour of the defendant property owner.cce

Tamara Faber and Bryan Buttigieg are partners and certified specialists in environmental law with Miller Thomson, in Toronto. tfarber@millerthomson.com  bbuttigieg@millerthomson.com