On October 7, 2011, the Ontario Court of Appeal allowed the appeal in Smith v. Inco Limited and, in so doing, overturned the July 2010 Ontario Superior Court’s trial decision, which had awarded $36 million in damages to certain property owners in Port Colborne, Ontario. These claimants had argued that Inco Limited was liable for the diminution in property values due to concerns related to the soil on the claimants’ properties containing nickel particles that had been emitted from Inco’s refinery over the 66 years prior to 1985. The Superior Court had held that, beginning in 2000, concerns about the possible adverse health effects of the nickel in the soil negatively affected the appreciation in the value of the properties (when compared with similar properties in another city). The Superior Court had found Inco liable for this diminution of property value under the tort of private nuisance and the rule in Rylands v. Fletcher.

In overturning the Superior Court’s decision, the Court of Appeal’s significant findings included the following:

  • The trial judge erred in holding that the discharge of the nickel particles by Inco on the properties of the claimants constituted an actionable nuisance. In particular, the Court of Appeal held that a mere chemical alteration in the content of soil, without more, did not amount to physical harm or damage to property. To constitute a nuisance, the alteration must be shown to have had some detrimental effect on the land itself or rights associated with the use of land. The Court also observed that there was no evidence that the nickel posed a risk to the health or safety of residents.
  • The trial judge erred in holding that Inco was liable for the discharge of the nickel particles under the rule in Rylands v. Fletcher. In particular, the Court of Appeal found that Inco’s historical operations were not “an exceptionally dangerous or mischievous thing” nor that the circumstances were “extraordinary or unusual.” To the contrary, the Court found that Inco operated a refinery in a heavily industrialized part of the city in a manner that was “ordinary and usual” and did not create risks beyond those incidental to virtually any industrial operations.
  • In the alternative, even if the claimants showed that Inco was liable under the tort of nuisance or the rule in Rylands v. Fletcher, the trial judge erred in holding that the claimants had established a diminution in value of their properties after September 2000. The Court of Appeal indicated that the trial judge’s calculation was flawed and that, in fact, the claimants had not suffered decreased appreciation in the value of their properties.

For further information, please see the Court of Appeal’s decision.