Law Times

Page 12 November 18, 2013 Law Times • FOCUS Will director liability weaken environmental protection? BY CHARLOTTE SANTRY Law Times T he $4.75-million remediation deal issued against former directors and officers of Northstar Aerospace Inc. could have the perverse effect of weakening environmental protection, lawyers are warning. On Oct. 28, 2013, the Ontario Environmental Review Tribunal accepted minutes of settlement that forced Northstar's directors to personally pay for cleaning up contaminated land at the insolvent company's site in Cambridge, Ont. Northstar made and processed helicopter parts there from 1981 to 2010. In 2004, environmental studies found chemicals used at the plant had affected more than 500 nearby homes. Further investigations showed contaminated groundwater extended to the Grand River. In 2005, Northstar started cleaning up the site as part of a voluntary process overseen by the Ministry of the Environment with costs estimated at $1.4 million annually over 10 years. In early 2012, the ministry issued two directors' orders against the firm's U.S.-based parent company that required $10.3 million in financial assistance for the cleanup. On June 14, 2012, Northstar Canada, Northstar Inc., and two related companies applied for and obtained protection from their creditors under the Companies' Creditors Arrangement Act. In August 2012, Northstar Canada was declared bankrupt. The ministry pursued 13 former directors and officers in an attempt to force them "Since the [Northstar] decision came out, the Environmental Reto continue to fund the view Tribunal ordered I've had multiple calls from clients and othremediation work. three board directors ers asking me to give advice to the boards Twelve of them apto pay for remediation and to speak to members of the board to pealed and tried to argue work on a site formerly talk about this exposure as people are conthe order would cause used as a resin produc- cerned," she says. them irreparable harm She agrees with the Davies' lawyers that tion facility. and that they weren't Cooper represented the decisions could ultimately have a neganecessarily on the board one of the directors found tive impact on environmental protection. at the time of the con"Many of the boards have very qualified liable for the cleanup who tamination. They were she says had "no under- and experienced members," she says. unsuccessful, however. "If these individuals are looking at standing" of the site and Following the Oct. personally having to open up their walhad only visited it once. 28 settlement agreeThe undisclosed cost lets, these types of people aren't going to ment, eight of those of the cleanup was on a come forward." among the group will The decisions could have the effect of much smaller scale than have to pay $4.75 mil'If these individuals are looking at person- in the Northstar case but "diluting the pool of candidates" able to eflion to the ministry. Lawyers from Davies ally having to open up their wallets, these "would be significant to fectively oversee measures to prevent contypes of people aren't going to come forthe average person," says tamination and environmental damage, Ward Phillips & Vineberg ward,' says Rosalind Cooper. Cooper. She says she has she argues. LLP say the case, Baker v. Directors should ensure they have liDirector, Ministry of the Environment, sets an been warning clients about the liability risks of orders relating to environmental ability insurance that covers environmental unfortunate precedent. Writing on the firm's blog, Alexandria cleanups since Currie but notes the quan- claims, she says. It's also important to carePike, Sarah Powell, Melanie Shishler, and tum of the Northstar decision and the fact fully scrutinize policies in order to ensure Marc-Andre Boutin said: "Without an ad- it's a well-known company have given the the potential costs of a cleanup order don't exceed liability caps. LT equate corporate response to protect di- message a boost. rectors from these kinds of orders, Baker v. MOE can be expected to make it more difficult for corporations to recruit and retain experienced board members, with the result that environmental protection will suffer." Continued from page 8 Instead of seeing Baker as a legal land"My law firm contributes a substantial amount of hours to pro bono cases and there are mark, Fasken Martineau DuMoulin LLP groups that form just to offer that in the environmental area." partner Rosalind Cooper says it builds on a The next generation of lawyers is certainly on board with the cause, according to lower-profile decision from 2011. Estrin. "When I look at the law students applying for jobs, they do have a better sense Currie v. Director, Ministry of the Enof social conscience," he says. vironment concerned a company's resin Comprised of experts and practitioners in environmental law and human rights, the production site believed to be causing task force will be preparing a report for submission to governments and agencies around water pollution. the world following the association's annual conference in Tokyo in October 2014. 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