Port Colborne class action sets new precedents

The Ontario Superior Court’s recent $36-million decision against mining giant Vale has set several environmental law precedents, including reinforcing the trend that Ontario courts have a kinder view towards property devaluation class actions than those dealing with personal injury.

However, even though personal injury cases are harder to prove in a class action setting, corporate counsel should be on the lookout for both arguments, as both carry potential hefty penalties, say environmental lawyers.

In his July 6 decision in Smith v. Inco, Justice Joseph Henderson awarded the residents of Port Colborne, Ont., $36 million in damages against Inco Ltd., which since the suit was filed in 2001 has been purchased by Brazilian company Vale in 2006. It is the largest class action decision based on damages from pollution in Canada and could have been even bigger if the contamination in question had been in a larger urban area.

Henderson agreed with the plaintiffs that nickel emissions released from Inco’s plant in Port Colborne had negatively affected property values in the area when the extent of the emissions became well known after a January 2000 Ministry of the Environment report was released.

“I accept . . . the general perception that the sales prices and sales volumes in Port Colborne seemed to drop starting in 2000,” Henderson wrote. “Logically, this announcement was the main reason for the reduction.”

The decision is important because it boosts the trend of environmental class actions that focus on property devaluation, says Marc McAree, a partner at Willms & Shier Environmental Lawyers LLP.

“Land value and personal injury can be quite different to prove,” says McAree. “The courts in Canada in the class action context have been much more supportive of property value devaluation claims, and that’s what we see here.”

He adds it’s important for corporate counsel not to lose sight of the fact that both types of arguments can be made in cases involving environmental discharges, and that in itself could increase the impact.

“In-house counsel need to have a good hard look at Smith v. Inco, and industrial companies may need to think proactively about policies to put in place in these cases,” he says.

The Inco class action started when Ontario’s Ministry of the Environment published a study on Jan. 26, 2000, showing substantial pollution, which led to real estate agents drafting protective clauses into agreements purchase and sale.

The class action was first filed in March 2001 and took more than eight years to reach trial.

Eric Gillespie, the lead lawyer for the plaintiffs, says the trial took too long but residents of the small Ontario town were happy with the result.

“The people of Port Colborne have been through quite a bit. Everyone we’ve been in contact with is happy and relieved that compensation has been awarded to the community,” says Gillespie.

Vale spokesman Cory McPhee says it will likely appeal the decision to the Ontario Divisional Court.

The contamination dealt with in Smith came from Inco’s operations from 1918 to 1984 at the community on the shores of Lake Erie. Inco has long been one of the town’s largest employers and continues to operate a metal-processing facility there, although it no longer works with nickel.

Vale is the second-largest diversified metals and mining company in the world, the world’s largest producer of iron ore, and the world’s second-largest producer of nickel.

Other important facts about Smith v. Inco, according to McAree, include:

• Reasonable use of the land for a lawful commercial purpose is not necessarily a defence to this

   strict liability claim.
• The plaintiff need not show that it could not sell or had attempted to sell its contaminated land to

   be entitled to loss of value damages.
• The court confirmed that Ministry of the Environment contaminant standards relating to how

   much contamination can remain in the soil do not establish the standard for civil liability.

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