Environmental regulators across Canada appear to be naming directors and officers of companies personally liable for environmental orders more frequently, particularly in situations of corporate bankruptcy or insolvency. Directors and officers should consider all available management strategies and actions to avoid the issuance of environmental orders and, if environmental orders are made, that the company has sufficient assets in place to cover the costs.
Legislation and “person responsible” for environmental issues
The concept of “person responsible” for environmental liability is broadly defined in environmental legislation across Canada to potentially include current and past directors and officers. Joint, several or retroactive liability may be imposed, and any one or more of the “persons responsible” may be named. Importantly, contracts do not alter regulatory liability as a “person responsible”.
Recent cases in Ontario and Alberta, including Baker v. Ministry of the Environment, illustrate the potential scope of an environmental regulator's jurisdiction to order current and/or former officers and directors to cover remediation costs. Since liability for remedial orders is joint and several, if the corporation has no assets to cover the remediation costs they may become payable from the officers and directors personally and there likely will be no source from which to recover the funds expended. Levying remediation costs against management of a polluting company does not necessarily accord with the polluter pays principle, but this is not a consideration in no-fault remedial orders.
Directors and officers must therefore be duly diligent when it comes to the environmental affairs of their corporations and take steps to protect both the environment and themselves. In general, these steps might include engaging environmental consultants, identifying the company's past, present or potential future environmental liabilities, assessing potential personal environmental liabilities and taking action to ensure the environmental liabilities are both addressed and monitored.