Law Times

November 24, 2008

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Law Times • November 24, 2008 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On ENVIRONMENTAL LAW remarkable — at least in the an- nals of environmental litigation. Port Colborne and property Pandora's box of environmental litigation T Pearson could have 'significant impact' BY JULIUS MELNITZER For Law Times he otherwise unremark- able town of Port Col- borne may soon become values there are the subject of a $750 million class action brought by thousands of residents after Ontario's Ministry of the En- vironment found high levels of nickel contamination in the area in 2000. They say that nickel oxide emitted by Inco between 1918 and 1984 caused the con- tamination. And the discovery of that contamination, they allege, led to a devaluation or at least a retardation of property values. If they succeed, the case could become the Pandora's box of Ca- nadian environmental litigation. "Pearson could have a very significant impact in the environ- mental area," says Eric Gillespie of Cunningham & Gillespie, who represents the plaintiffs as co-counsel with Koskie Minsky's Kirk Baert. "The central issue is whether the announcement of contamination negatively impact- ed property value over a large area. This type of situation has occurred in a number of other Canadian communities and it is conceivable that it will occur again." What's unique about Pearson is the absence of a big bang. "To be sure, each case turns on cause," says Larry Lowenstein of Osler Hoskin & Harcourt who, with co-counsel Alan Lenczner of Toronto's Lenczner Slaght Royce Smith Griffin, represents Inco. Pearson is more like the Chi- nese water torture, and that's what potential defendants find chilling. After all, the contami- nation is said to have begun al- most a century ago and ended some 24 years ago when the Inco plant closed, only to have the issue rear its head some 16 years later in the course of the MOE's investigations. The trial, which was scheduled to being this fall, has been post- poned to October 2009, when it is expected to last two months. But the case has had a tortuous route from the outset. To begin with, Justice Ian Nor- dheimer of the Superior Court refused certification to the class in 2002, primarily because a class proceeding was not the "prefera- ble procedure," as required by the Class Proceedings Act. Two years later, the Divisional Court upheld his ruling. On further appeal, however, 'This is certainly the first case of its kind, but the common law doctrines we rely on are well established,' says Kirk Baert. its own facts, but the typical case is one like the propane explosion in Toronto where everyone can point to a single incident as the the Court of Appeal in 2006 came down in favour of what it called "a somewhat more liberal approach" to the certification of class proceedings. In its reasons, the court point- ed out that the plaintiffs had abandoned their health claims. This reduced the class from 20,000 to 8,000 members. While the claim as originally framed would not have advanced judicial economy as "the indi- vidual claims of injury to health and related claims would dwarf the resolution of the common is- sues," this was no longer the case. Adjudication of individual claims might still be required to deter- mine individual damages, but in the context of property damage only, this consideration did not override the existence of substan- tial common liability issues that were appropriate for resolution by way of class proceeding. Inco's lawyers had pointed out that alternative legal remedies to class actions existed because the MOE had required Inco to con- duct a "Community Based Risk Assessment" to establish that the health of local residents was not at risk, and Inco had done so. But the Court of Appeal ob- served that this process did not deal with the specific complaints of the amended class action be- cause it failed to address mone- tary claims for reduced property values. At the very least, then, Pearson provides a clear precedent that class proceedings claiming property damage from a single source stand a good chance of certification even absent a big bang. the community," he wrote. Although the Supreme Court of Canada denied Inco's applica- tion for leave to appeal, Lenczner says the certification is a prod- uct of "woolly thinking" on the Court of Appeal's part. "It's nuts," he said. "How can Also of considerable interest to the business community are the court's statements about "behav- iour modification" as an element of class actions generally. Nordheimer had ruled that certification was not required for behaviour modification reasons be- cause the MOE was already moni- toring the situation and Inco had established the CBRA. But the Court of Appeal dis- agreed. "Modification of behaviour does not only look at the par- ticular defendant but looks more broadly at similar defendants, such as the other operators of refineries who are able to avoid the full costs and consequences of their pollut- ing activities because the impact is diverse and often has minimal impact on many," he wrote. "This is why environmental claims are well suited to class proceedings." The court also rejected the ar- gument that certification might make Inco less co-operative. "I do not agree with the proposition that property own- ers must abandon their legal rights and their right to be made whole in order to buy the co-op- eration of a defendant they say has caused widespread harm to PAGE 9 you expect commerce to operate when companies like Inco who have met all regulatory require- ments and caused no health hazard have to put up with the contention that the escalation of house prices was not as robust as it might have been? Pretty soon people will find companies to blame because the prices in their town haven't gone up as much as in Toronto." Baert counters that the theo- ries behind the plaintiffs' claim are hardly earth-shaking. "This is certainly the first case of its kind, but the common law doctrines we rely on are well established," he says. However that may be, Lenc- zner says Inco isn't an environ- mental claim at all. "If someone sprinkles oxygen over your property, and there's no health hazard, how is that an en- vironmental claim?" he asks. What the case is about, Lenc- zner adds, is the perception of a health hazard. "The certification talks about the decrease in property values caused by the perception cre- ated by the announcement of nickel contamination," he says. "But whose perception are we talking about? Shouldn't you re- serve environmental claims for real things, and not just Alice in Wonderland?" LT EU has ambitious new plan for climate change BY JULIUS MELNITZER For Law Times pean Parliament had brought forward the date of a plenary vote on the European Union's climate and energy proposals to Dec. 3 in what is widely seen as a strate- gic move to head off dilution of the plan by national governments. The plan's goals include a 20 per cent climate change and promote renewable energy so as to achieve the goals its lead- ers formulated at the March 2007 Euro- pean Council. But by the fall, European CO2 emissions allowances were trading at an 18-month low, crude oil prices had dropped 50 per cent since July, and fi- nancial markets were in crisis, putting potential investment in clean technolo- gies and renewable energies — which are at the heart of the plan — at risk. Indeed, by mid-November, the Euro- O n Jan. 23, the European Com- mission announced an ambi- tious, detailed plan to fight reduction in greenhouse gas emissions, a doubling to 20 per cent of energy pro- duced from renewable sources like wind and solar power, a 20 per cent increase in energy efficiency, and a 10 per cent biofuel component in transportation fuel — all by 2020. The plan also makes significant changes to the EU's emissions trading scheme, including the following: there will be one EU-wide cap on the • • • • • • number of emission allowances rather than 27 national caps. The annual cap will decrease year-over-year; a much greater share of allowances will be auctioned instead of given away; the EU will introduce harmonized rules regarding free allocations; allowances will be redistributed from rich to poor states; new industries and gases will be added to the scheme; and member states can exclude small instal- lations from the EU trading system, so long as they are subject to equivalent national emission reduction measures. by establishing national targets which will become law when passed by national gov- ernments and the European Parliament. Generally speaking, more is being asked of the wealthy than the poor. For example, the plan contemplates that Sweden will meet 49 per cent of its en- ergy needs from renewables, while Malta gets away with 10 per cent. Denmark must cut emissions by 20 per cent, but Bulgaria and Romania can let them rise by the same amount. "The proposal still has to get by the The plan seeks to achieve these goals European Council and the European Parliament before it becomes law," says David Haverbeke, a partner at Lydian in Brussels. "What will remain of the pro- posal after these processes is unclear." But it's not just the member states that will be horse-trading over their ob- ligations. Already business has criticized the plan, whose cost EC President Jose Manuel Barroso has estimated at $86.6 billion, as too expensive or too damaging to certain sectors. www.lawtimesnews.com "There's a whole lobby machine work- ing intensively to lower the plan's goals," says Wim Vandenberghe, head of DLA Piper's litigation and regulatory practice in Brussels. The business community's objection is simple: it does not believe that the plan's targets can be achieved. "It's important to appreciate that in- dustry is already making heavy invest- ment in technology that consumes less, so perhaps the reduction side of the plan might work," Haverbeke says, "But dou- bling green generation by 2020 is just not feasible." Because the targets vary from mem- ber state to member state, some will have to do more than double the energy pro- duced from renewable sources. Belgium, for example, now generates two per cent of its energy needs via green energy, but the plan requires it to triple the green component to six per cent by 2010. "I'm involved in quite a few proj- ects that have no hope of reaching that See Gross, page 10

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