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Law timeS • September 7, 2010 FOCUS $36M award over nickel plant Inco ruling lays new ground for environmental class actions BY JULIUS MELNITZER For Law Times E arlier this summer, Jus- tice Joseph Henderson of the Ontario Superior Court awarded $36 million in damages arising from nuisance and strict liability to a group of Port Colborne, Ont., property owners who alleged that emis- sions from a nearby Inco Ltd. nickel refi nery had contaminat- ed the soil and caused a drop in property values. Henderson refused, however, to award punitive damages in Smith v. Inco, which was the fi rst environmental class action to reach trial in Canada's common law provinces. Kirk Baert of Koskie Minsky LLP and Eric Gillespie of Cun- ningham & Gillespie LLP were lead counsel for the plaintiff class. Alan Lenczner of Lenc- zner Slaght Royce Smith Grif- fi n LLP and Larry Lowenstein of Osler Hoskin & Harcourt LLP led the Inco team. Th e case arose after Ontar- io's Ministry of the Environ- ment found high levels of nick- el contamination in the area in 2000. Th e plaintiff s alleged that nickel oxide emitted by Inco between 1918 and 1984 caused the contamination and that the discovery of it led to a devaluation or at least a retar- dation of property values. Th e case could become the Pandora's box of Canadian envi- ronmental litigation. Th e typical environmental case involves an incident, much like a propane explosion many years ago in the Toronto area did, in which the cause of damage can be isolated relatively easily. Inco, however, was more like Chinese water torture, which potential defendants fi nd chill- ing. After all, the contamination is said to have begun almost a century before and ended some 24 years ago when the Inco plant closed only to have the issue re- turn 16 years later in the course of the ministry's investigations. Th e case has had a tortuous route from the outset. To begin with, Justice Ian Nordheimer of the Superior Court refused certifi cation in 2002 primarily because a class proceeding wasn't the prefer- able procedure, as required by the Class Proceedings Act. Two years later, the Divisional Court upheld his ruling. In 2006, however, the Court of Appeal came down in favour of what it called "a somewhat more liberal ap- proach" to the certifi cation of class proceedings. In its reasons, the court point- ed out that the plaintiff s had abandoned their health claims. Th is reduced the class to 8,000 from 20,000 members. While the claim as origi- nally framed wouldn't have ad- vanced judicial economy since "the individual claims of injury to health and related claims would dwarf the resolution of the common issues," this was no longer the case. Adjudica- tion of individual claims might still be necessary to determine individual damages but in the context of property damage only, this consideration didn't override the existence of sub- stantial common liability issues that were appropriate for resolu- tion by way of class proceeding. Inco's lawyers had pointed out that alternative legal rem- edies to class actions existed be- cause the ministry had required the company to conduct a com- munity-based risk assessment to establish that the health of local residents wasn't at risk, which it had done. But the Court of Appeal observed that this pro- cess didn't deal with the spe- cifi c complaints of the amended class action because it failed to address monetary claims for re- duced property values. plaintiff s' success in Inco, the argument that class proceedings are the preferable procedure for deciding these types of cases now carries empirical proof. For his part, Baert says the theories behind the plaintiff s' claims are hardly earth-shaking. "Th is is certainly the fi rst case of its kind, but the com- mon law doctrines we rely on are well-established," he says. "Th ere's nothing surprising about the result." But Lenczner is highly criti- 'There's nothing surprising about the result,' says Kirk Baert. Th e appeal court's judgment, at the very least, suggested that class proceedings claiming property damage stood a good chance of certifi cation even without a big bang of the Su- perior Propane type. With the cal of Henderson's fi ndings and reasoning. To begin with, he says the judge erred in fi nding there was any measurable decrease in property values. "Th e evidence compared Port Colborne to Welland, and the diff erence overall amounted to one-half per cent annually. But that so-called disparity is not indicative of anything because you can't reduce comparables to an exact science." Lenczner also argues, among other things, that the compa- rables were skewed; that there was no evidence of physical damage; that nickel isn't the type of dangerous substance that can uphold a claim in nuisance; and that Inco was engaged in a lawful business operation and has historically been in general compliance with ministry regulations. "Th e irony is that Inco's law- ful business, an industrial use that had been permitted for 66 years, also provided gainful employment for the commu- nity, including many individu- als who were members of the plaintiff class," Lenczner, who's optimistic about Inco's chances on appeal, notes. "Th is is a good case for some- one to analyze and do a job on. And that's what we're going to do in the Court of Appeal." LT PAGE 11 Accident Benefits in Ontario James M. Flaherty and Catherine H. 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