Smith v. Inco involved an environmental class action brought on behalf of approximately 7,000 residential property owners in the City of Port Colborne, where Inco operated a nickel refinery from 1918 to 1984. The class proceeding arose primarily as a result of a number of phytotoxicological studies and testing conducted by the Ministry of the Environment (“MOE”), indicating that nickel levels in the soil in many parts of Port Colborne exceeded MOE guidelines.

Inco was found liable in private nuisance for the discharge of nickel and under the doctrine of strict liability for failure to prevent the escape of a dangerous substance. The class was awarded a total of $36,000,000 in damages for diminution in property values. In so deciding, the Ontario Superior Court of Justice made the following findings that may be of interest to business owners, as well as tenants and lessees of commercial properties:

  • Although Inco’s operations constituted a “reasonable” use of the land, it did not constitute a “natural” use of land in that the nickel particles were not naturally on the land or in the air over the land  
  • A reasonable use of land for a lawful commercial purpose is not necessarily a defence to a (Rylands v. Fletcher) claim of strict liability and may still be deemed an unlawful nuisance  
  • Nuisance claims can be based on a single isolated escape of contaminant from land, and are not limited to the continuous or long‐term release of contaminants The claim against Inco constituted a private nuisance but did not constitute a public nuisance since Inco’s conduct did not damage or interfere with matters such as public health or public comfort, nor had it affected any public resource such as a lake or river  
  • The standards set by the MOE are for mandatory cleanup and do not necessarily set the standard for civil liability  
  • If nickel accumulated on the class members’ properties in such amounts as to negatively affect the values of the properties, then the physical damage to the properties is “material”  

Interestingly, the Court found that even though the class members had not yet sold their homes, they were entitled to seek damages from Inco on the basis that the nickel particles in the soil could not be removed and the damage suffered was therefore permanent. The Court found that it was “inconceivable” for it to require more than 7,000 property owners to sell or attempt to sell their property before establishing a cause of action against Inco.

Notwithstanding, the Court also held that Inco’s conduct did not warrant an award of punitive damages in that it was not so malicious or oppressive that it “offends the court’s sense of decency”. Rather, Inco was engaged in a lawful business operation for many years and provided gainful employment to many people, including some of the class members. Although Inco’s conduct was unlawful and caused widespread material damage to the property of its neighbours, Inco had generally complied with the MOE regulations throughout its history and had reduced emissions of nickel from its refinery over time, eventually ceasing nickel emissions altogether in 1984.

Leave to appeal to the Ontario Court of Appeal has been granted to Inco.