On July 26, 2010, McLennan Ross reported on a decision by the Ontario Superior Court of Justice, ordering Inco Limited (“Inco”) to pay $36 million to past and present property owners in Port Colborne in connection with a class action. This class action alleged an impairment of property value appreciation due to soil contamination arising from Inco’s operation of a nickel refinery in Port Colborne for 66 years (up to 1985). Liability was imposed on the basis of nuisance and Rylands v. Fletcher (whereby a land user is strictly liable for any damage caused by failing to prevent the escape of a dangerous substance from the property).

In our previous e-alert, we commented that the Court’s findings with respect to the timing of the action had the potential to be far reaching. Although claims based on the Rylands v. Fletcher doctrine must be brought within six years under Ontario limitations legislation, the Court found that it was only after the Ministry of Environment made public concerns with respect to nickel contamination in the soil that residents became aware of the material facts associated with their claims. The trial judge accepted that the limitations period in relation to a claim for impairment of property values commenced in September of 2000, and so the claim against Inco was not time-barred.

The Court of Appeal did not expressly reverse this finding, although it did overturn the trial judge’s decision on a number of grounds. Specifically, the Court of Appeal reversed the trial judge as follows:

  1. The Court of Appeal found that there was no evidence of actual physical harm to the properties of the class members, nor was there any evidence that the class members had experienced an interference with their ability to use and enjoy their property. Rather, the only evidence was of perceived risks of human health impacts from nickel contamination, which perception allegedly impaired property values. The Court found that nuisance required either actual property damage or interference with use.
  2.  The claim under Rylands v. Fletcher required the damages to arise from an unintended consequence of a non-natural use of the land. The nickel emissions from the refinery operation accrued over a period of 66 years, and were the natural and ordinary consequence of such operation. That operation was licensed by government regulators, and the risks associated no different than any other industrial operation. Accordingly, there was no unintended consequence, nor any non-natural use of the land, and so the Ryland v. Fletcher claim also failed.
  3. The Court of Appeal found that property values in Port Colborne had actually appreciated as well as or even better than the relevant comparator municipalities, and so there was no evidence of damages, even if the causes of action had not failed.
  4. Lastly, although the Court did not have to comment on the limitations question because of the findings above, the Court did observe that it was not sufficient to find, as the trial judge did, that a majority of class members were not aware of the nickel contamination risks until after the risks of soil contamination became public. Therefore, the Court of Appeal found that the application of limitations legislation was not properly treated as a “common issue” to be determined on behalf of the entire class, but rather was an individual issue to be determined on a member-by-member basis after the common issues trial was over. This raised the possibility of Inco being able to use, as against individual claimants, a limitations defence where there was evidence that that individual claimant had knowledge of the nickel contamination issues prior to September 2000. From a class actions perspective, this is a potentially important development. It may make it more difficult to certify class actions (in particular environmental contaminated site class actions) with limitations issues, if other Courts accept the reasoning that the timing of knowledge of widespread contamination is an individual issue not suitable for certification as a common issue in the class proceeding.

In addition to dismissing the claim, the Court of Appeal further awarded costs of $100,000 payable to Inco by the Plaintiff Class. This decision likely will have a cooling effect on the implications of the trial decision, although it does still leave open the door for long standing contamination claims to be advanced notwithstanding limitations legislation. There is a reasonable likelihood that the Plaintiff class will seek leave to appeal this decision to the Supreme Court of Canada, so the story may not be over yet. We will continue to monitor how this matter unfolds and comment on future developments.