Law Times

PAGE 12 FOCUS March 29, 2010 • Law TiMes Few class actions emerging despite legislative changes Directors facing increased legal risk BY DARYL-LYNN CARLSON For Law Times ment and curb global warm- ing, companies are increasingly exposed to liabilities as a result of legislative changes by all lev- els of government. The push is leaving officers A who serve on public boards more vulnerable to civil liability, which mirrors a trend over the past few years in the United States. "It has been a common law rule that officers and directors of corporations were not usually subject to civil liability to third parties for torts committed by their corporations, provided the corporate officers and directors act within the scope of their authority honestly and in good faith," says Marc McAree, a part- ner and certified environmental law specialist at Willms & Shier Environmental Lawyers LLP. "But what we are finding is that there have been more civil s Ontario strives to in- troduce new measures to preserve the environ- claims advanced against corpo- rate officers and directors who can be held civilly liable if their acts or omissions are grossly neg- ligent or fraudulent. So we will see that the courts will, from time to time, pierce the corporate veil and impose civil liability." McAree says there are essen- tially three ways in which a com- pany and, in particular, its boards of directors, face liabilities. First, any court-ordered find- ings, such as damages or an injunction preventing further contamination, could mandate directors to comply individually. Secondly, an action through Ontario's Environmental Re- view Tribunal can lead to an appeal in which other parties will apply to receive standing to state their concerns and re- sult in a finding that can hold officers and directors respon- sible, McAree notes. Finally, a prosecution by the Ministry of the Environment resulting from amendments to Ontario's legislation in 2005 or under the Environmental environmental awareness means boards should adopt a proac- tive approach by establishing a committee to track legislative and legal developments and fa- cilitate a culture of continuing improvement. "It's often the in-house lawyer Corporate boards should take a proactive approach by estab- lishing a committee to track legislative and legal develop- ments, says Marc McAree. Protection Act can lead to a conviction involving fines or even a prison sentence. As well, under the federal Environmental Enforcement Act that was passed last May but has yet to be proclaimed into force, repeat offenders and large corporations can face fines as high as $12 million. "So as you can see, there is an incentive for corporations to act diligently and not find themselves being prosecuted by the government," says McAree. He suggests the rise in Structured Settlements BC LT 4/6/05 2:54 PM Page 1 or environmental lawyer who can kick-start or assist the board of directors or senior manage- ment before an environmen- tal event gives rise to liability," McAree says. "Good environ- mental management necessitates a top-down commitment where corporate boards of directors are essentially mandating that environmental stewardship is good for the company. If they can achieve that way of think- ing, they are less vulnerable to environmental liability and can avoid unwanted legal attention." On the other hand, while companies and their boards are indeed facing greater exposure to civil and regulatory consequenc- es, there hasn't been a significant rise in class action litigation. "These types of things do potentially affect the boards of directors because boards are essentially liable under certain circumstances for the actions of the company," says Mike Peerless, a partner at Siskinds LLP in London, Ont. But surprisingly, lawyers who handle class action cases haven't seen the increase in claims they had been expecting. "We always thought when we first started these cases that there would be lots of these cases because they affect large groups of people," says Peerless, who obtained certification in the first environmental class ac- tion in Ontario. He suggests the Supreme Court of Canada's decision to decline certification in a case called Hollick v. Toronto (City) in 2001 may have dissuaded lawyers from pursing that course of action. In that decision, the top court decided a class action wasn't the preferable procedure to resolve the dispute. "I think that case was very specific," says Peerless. "But maybe it has made a lot of law- yers who do class actions a little bit hesitant to take one forward. So it's interesting because there just haven't been a huge number of class actions going forward." His firm has been involved in only a handful of environmental class actions, including one that is ongoing in Nova Scotia. At the same time, Siskinds hasn't had a lot of clients in- quiring about launching an environmental class action that it's had to refuse due to insuf- ficient facts. Although a class action seems to be a logical recourse against an alleged polluter, Peerless says such cases can be very challenging. "They're very complicated cases and can be difficult to do. So ultimately, that might be one of the reasons there aren't as many as you'd expect." On the other hand, Peerless says the fact that there hasn't been a flurry of class actions re- lated to environmental matters may be a good sign that com- panies are in fact being respon- sible and proactive. "Well, maybe it is good news and maybe it just doesn't hap- pen as much as the press makes you think." LT enderson_LT_Mar29_10.indd 1 3/24/10 11:47:09 AM Baxter_LT.indd 1 www.lawtimesnews.com 12/11/08 9:02:24 AM

• Cover
• Gearing Up
• Cutting Red Tape
• Focus On Energy/Environmental Law