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British Columbia Supreme Court Breaks New Ground on Contaminated Sites

Date

September 17, 2014


On August 25, 2014, the British Columbia Supreme Court (BCSC) issued reasons in J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619. The case involved an action by J.I. Properties Inc. (JIP), a current owner of a contaminated site, to recover approximately $5.3 million in remediation costs of James Island which were spent from 2004 to 2006 from the defendant and previous owner, ICI Canada Inc. (ICI). The Court awarded JIP $4.75 million in remediation costs. This decision is significant for the:

  • comprehensive analysis of limitation issues arising in cost recovery claims under the Environmental Management Act (EMA);
  • deference granted to highly qualified environmental consultants when dealing with the reasonableness of remediation costs; and
  • new direction respecting allocation of liability to responsible persons.

ICI was the owner and operator of explosive manufacturing and storage operations on James Island between 1954 and 1985. The explosives and related chemicals manufactured and used on the property included trinitrotoluene (TNT), dynamite, nitroglycerine, and dinitrotoluene (DNT). ICI undertook remediation of the lands between 1986 and 1988, a time when the regulation of environmental contamination in British Columbia was in its infancy and there were no established standards for the remediation of the contaminants in question. At this time, ICI and the British Columbia Ministry of Environment (MOE) agreed on the applicable criteria to be used in the remediation, and in a "comfort letter" written to ICI, the MOE indicated the remediation conducted by ICI was completed in accordance with those criteria and there were no further environmental concerns on the property. Also, in 1988, a restrictive covenant was registered on title on a portion of the property in regards to the contamination.

Following JIP’s 2004 purchase of the property, JIP engaged an environmental consultant to conduct remediation of the property, including a preliminary site investigation, detailed site investigation and clean-up. By this time, the regulatory regime respecting remediation of contaminated sites had changed significantly and the EMA and corresponding Contaminated Sites Regulation prescribed detailed standards for remediation. JIP initiated its cost recovery action against ICI in March 2009.

Limitation Period

The first issue addressed by the Court was the appropriate limitation period applicable to JIP’s cost recovery claim. Since the remediation took place between 2004 and 2006, the 1996 Limitation Act, now repealed, was held to govern. This Act provides limitation periods of two years or six years from the date the cause of action arose. In regards to when an EMA cost recovery action arose, the Court rejected the approach of separate and multiple causes of action every time a particular remediation cost is incurred. Instead, the Court favored an aggregate approach, wherein the cause of action does not arise until all aspects of the remediation have been completed and all costs are actually paid. As a result, the Court held that JIP’s right to bring an action arose in March 2007 (less than two years before the action was started) and all costs reasonably incurred before that date were recoverable, regardless of the date they were incurred. Well-reasoned, the Court held the appropriate limitation period for cost recovery claims under the EMA is six years instead of two.

Responsible Persons

The Court also analyzed whether the defendant, ICI, was a "responsible person" within the meaning of the EMA and in particular whether it were exempt from liability by virtue of having remediated the lands to the satisfaction of the MOE in the late 1980s. ICI argued the MOE’s comfort letter was equivalent to a certificate of compliance under the current regime, thereby permitting ICI to rely on the EMA’s "certificate of compliance" exemption from liability. The Court rejected this position and held that: (1) the comfort letter did not meet the current definition of "certificate of compliance"; and (2) if the EMA intended to exempt persons who remediated contamination before the current regime was implemented, it would have expressly stated so. The Court also addressed whether the plaintiff, JIP, was a responsible person and in particular whether it qualified for the "innocent acquisition" exemption under the EMA. The Court held JIP was a responsible person, as it clearly had reason to suspect the existence of contamination on the lands, and emphasized JIP’s knowledge of a restrictive covenant on title indicating the presence of contaminants on the property.

Remediation Standards

ICI also challenged the propriety of the remediation standards used by JIP for its remediation activities and argued that alternative approaches could have been employed in the circumstances. In rejecting ICI’s argument, the Court held it was reasonable for JIP to rely on the remediation standards recommended by its highly qualified environmental consultant. Furthermore, the Court held that the concept of reasonableness does not mandate the most cost-effective options for remediation and that reasonableness requires a consideration of all the circumstances. This ruling signals the Court’s willingness to give deference to the recommendations and advice of environmental consultants.

Allocation

After taking into account a variety of "rough justice" discounts, the Court awarded JIP $4.75 million in remediation costs, payable entirely by ICI. Significantly, the Court added that JIP as an innocent party did not contribute to the contamination on the lands, and did not allocate any liability to JIP as a "current owner" of the property. This is in contrast to the ruling in `Gehring et al. v. Chevron Canada Limited et al., 2006 BCSC 1639 in which the Court apportioned 25% of the liability to the current owner of the contaminated lands in question.