Do The Innocent Get Compensation After MOE Orders?

Cleaning up your neighbour's mess: Recovery of spill clean-up costs by the innocent party.

It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generally different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution.1

Do we, in Ontario, have effective remedies when innocent parties are forced to pay for contamination they did not cause?

Under the Environmental Protection Act,2 an innocent party can be ordered to bear the cost of addressing the consequences of a spill or other contamination – including delineation, clean-up, studies, and more. A complete absence of fault is not an effective defence. In justifying imposing such costs on the innocent, the Ministry of the Environment, the Environmental Review Tribunal (ERT), and any reviewing court, tend to airily claim that the innocent party can obtain compensation through "other legal avenues".

In practice, this is often untrue. Based on our review of the case law, the theoretical statutory and common law mechanisms for compensation have not produced any successful recoveries using the compensation provisions under the EPA, or in unjust enrichment.

1. HOW CAN AN INNOCENT PERSON BE ORDERED TO CLEAN UP?

   There are a number of provisions in the EPA which have been, or could be, used to order innocent parties to deal with the adverse effects of a spill.

   1. Preventative Measures Order – Sections 18 and 157.1

      Both the Director of the MOE and provincial officers can issue preventative measures orders under sections 18 and 157.1, respectively, of the EPA. A section 18 order can be issued against a "person who owns or owned or has or had management or control of an undertaking or property". Both current and past owners of a site can be ordered to clean up contamination. Section 157.1 allows a provincial officer to issue an order to a person who "owns or who has management or control of an undertaking or property" and is limited to measures intended to prevent future discharges of contaminants from the property.

      Section 18 was the basis for the Director's clean-up order in 724597 Ontario Ltd., Re ("Appletex").3 The Director issued the order to the company as well as the a company director and two significant individual investors who had moved into a managerial role to protect their investment. The order required the parties to decommission a wool knitting and dying mill, requiring decommissioning of 3 lagoons into which effluent had been discharged, disposal of a variety of wastes and fire hazards, and securing the site.

      The investors and the director appealed to the Environmental Appeal Board. The Board relieved the director of liability and upheld only the requirement to secure the site against the investors. The basis for its ruling was a set of "fairness" factors, including considerations of causation and fault. Following Appletex, investors, landlords and previous owners had good reason to believe that the MOE would be limited to naming only "guilty" parties.4

      In Appletex, the Ontario Environmental Appeal Board commented that the potential to recover the costs of an order could be a relevant factor in assessing the fairness of an order (although the Ontario Court of Justice decision did not address this point5) noting:6

      It is possible that when this Board imposes unlimited joint and several liability on a person before it without regard to apportionment or capping of liability, this may result in unjust enrichment of others who may benefit from the clean-up of the land. For example, if, as alleged, the municipality dumped waste on this property, it could be unfair if Messrs. Bell and Harris removed this waste, making the property more valuable, and the municipality then reaped the benefit of this added value when selling the property to recover unpaid municipal taxes.

      Unjust enrichment does appear to be a relevant factor when considering the fairness of a clean-up order. However, it may be impossible for the Board to determine whether there will be unjust enrichment without adequate evidence. There are many legal and factual contingencies that make it difficult for this Board to determine which creditors will ultimately recover money, how much each will recover, how much the clean-up will eventually cost, and how the clean-up will affect the value of the property. In this case, the Board does not have sufficient evidence to deal with this issue.

      However, this consideration for the impact on the innocent has since been abandoned.

      In Kawartha Lakes (City) v. Ontario (Director, MOE), a furnace oil spill on private land migrated onto the neighbouring municipally owned land. The ERT and the Court upheld an Order against the City, issued under s. 157.1, requiring it to clean up the municipally owned land although everyone acknowledged the City was entirely free of fault for the spill.7 In reaching his decision, Tribunal Vice Chair De Marco found that the issue of fault was not relevant to the issues before the ERT and should be considered elsewhere:8

      At the end of the day...