Often cited as a foundation of environmental law in Canada (and elsewhere), the “polluter pays” principle posits that polluters should (at least at first instance) be the immediate party responsible for the costs and damages relating to the contamination they cause. In fact, the preamble to the federal Canadian Environmental Protection Act expressly endorses this principle:

“Whereas the Government of Canada recognizes the responsibility of users and producers in relation to toxic substances and pollutants and wastes, and has adopted the “polluter pays” principle.”

Some recent decisions should, however, cause companies doing business in Canada to look carefully at the law in the provinces and territories in which they are operating before assuming that the “polluter pays” principle will necessarily determine where civil or administrative environmental liability is placed.

Specifically, the provincial courts in British Columbia and Ontario appear to have taken diametrically opposite approaches in considering the polluter pays principle in land contamination matters: the BC court reinforced the principle under its statutory liability allocation scheme, while the Ontario court concluded that this principle cannot override clear legislative intent to protect the environment:

BC’s EMA Incorporates Polluter Pays:

In J.I. Properties, an innocent purchaser sued the historical owner, which operated a manufacturing and storage facility, for payment of these cleanup costs it incurred. The purchaser argued that the historical owner was a “responsible person” liable for reasonably incurred remediation costs under BC’s Environmental Management Act (the “EMA”). When the historical owner closed the operations, there were no statutory environmental contamination laws in BC.

Despite rejecting the purchaser’s “innocent acquisition” defence under the EMA, the court still held the historical owner for all of the reasonable remediation costs, even though both it and the purchaser were both included among the “responsible parties” under the EMA. The court emphasized that the EMA is intended to:

“to ensure that the person who pollutes the land pays for the cost of its restoration. This is the so-called ‘polluter pays’ principle that animates the regime.” J.I. Properties Inc. v. Architectural Coatings Canada Inc.

Clearly, polluter pays is alive and well under the EMA.

Ontario Places Public Interest Before Polluter Pays:

In Kawartha Lakes (City) v. Ontario (Environment), fuel oil spilled on a residential property, then migrated onto the City’s adjacent property, ultimately also impacting the abutting lake. The Ontario Ministry of the Environment (the “MOE”, as it then was) ordered the City, and not the residential property owner, to remediate the effects of the spill.

The City appealed the MOE’s order to the Environmental Review Tribunal (the “ERT”), asserting its innocence and ignorance of the property site conditions. Both the ERT and the reviewing Divisional Court affirmed the decision and upheld the order. The Ontario Court of Appeal, in turn, upheld the Divisional court’s decision. The City argued in vain that the lower courts did not adequately consider the polluter pays principle. The City was identified as the deepest pocket and, in spite of its innocence, the overriding consideration adopted was the protection of the environment, not making the polluter pay. Kawartha Lakes (City) v. Ontario (Environment)

Ontario courts appear willing to turn to innocent parties in imposing environmental liability, even if it creates “unfair” results against non-contaminating parties. Owners, tenants, purchasers and even lenders will need to need to stay informed on the environmental conditions of both the neighbouring properties as well as their own, complicating brownfield transactions even further.