Law Times

Law Times • November 23, 2015 Page 11 www.lawtimesnews.com Lawyers concerned about ruling against financial adviser Recent case suggests a trend that even legal counsel could be on the hook BY YAMRI TADDESE Law Times nvironmental lawyers are expressing concern about what they say is a trend of holding company execu- tives personally liable for contam- ination-related orders after the Environmental Review Tribunal upheld decisions against a finan- cial adviser and a lender. The appellant, Alberto Ro- cha, didn't own the property or business where the contami- nation occurred. The tribu- nal nevertheless found he had "management and control" of the company and its finances. "Having considered the totality of the evidence, the tribunal finds, on a balance of probabilities, that the appellant has both manage- ment and control of an undertak- ing or property under s. 157.1(1) of the [Environmental Protection Act]," wrote panel members Hugh Wilkins and Robert Wright. "The Appellant's manage- ment of the environmental issues and the Property overlaps with his financial control. He has had a strong inf luence over decisions concerning the contamination on, in, or under the Property and the plume that create the risk of discharge of a contaminant into the environment." The decision ref lects a trend of broadening the potential for personal liability in environmen- tal matters, says Donna Shier of Willms & Shier Environmental Lawyers LLP. "It's very concerning because businesspeople assumed that they were personally pro- tected. This is a trend that demon- strates tremendous insecurity." In Rocha v. Ontario (Environ- ment and Climate Change), Rocha argued his role included translat- ing materials to Portuguese for Manuel Machado, the owner of the companies that operated Au- tochrome Ltd., a chrome-plating business in Oakville, Ont. Rocha argued he explained matters, including environmental ones, to the owner but sought his opin- ion before acting. But the director of the Ministry of the Environment and Climate Change argued Rocha's role was more than that. "The director argues that the appellant also inf luenced decisions relat- ing to the companies and Mr. Machado through his role as an advisor. The director argues that the appellant was Mr. Machado's source of information regarding environmental issues at the prop- erty," wrote the adjudicators. Gowling Laf leur Hender- son LLP environmental lawyer Mark Madras says that if the abil- ity to inf luence decision-making through an advisory capacity can amount to management or con- trol, lawyers may be in trouble as well. "We as lawyers are advisers, and very often our advice may have a significant inf luence on the decision and that's a very trou- bling concept that if you're an in- f luential adviser, you may be seen to be actually a person in manage- ment or control," he says. "The appellant held himself out to the Ministry of the Envi- ronment and to the contractor as the person overseeing and managing the environmental issues. And very often, lawyers would be the point person with the Ministry of the Environ- ment in negotiations and law- yers might be the point person with the contractor," he adds. Miller Thomson LLP envi- ronmental lawyer John Tidball says that upon reading Rocha, his thought on the appellant's role was that it "looks a lot like what we do." "I'm often the one window to the client," says Tidball, adding Rocha is consistent with a trend in which environmental clean- up and contamination preven- tion trump fairness to the indi- viduals involved. Madras says the case serves as a "cautionary tale" for coun- sel. "I think the lesson here for lawyers is to make clear to the regulator that you're speaking to them in the capacity of counsel and adviser on behalf of the cli- ent . . . and not create documents or a record that might construe you as being the person actually managing the property." Still, Shier and Madras agree that the specific circumstances of the case are important, especially given that Rocha was indirectly lending money to the company via a mortgage. "The appellant's management of the environmental issues and his role as a lender to Autochrome and a beneficiary of the TD SDRSP mortgage underscores the overlap of 'management' and 'control' in applying s. 157.1(1)," the tribunal said. "The appellant was placed in charge of managing the environ- mental issues of the property that create the risk of discharge," it continued. "His financial control is evidenced by his strong inf luence on decisions regarding the known contamination of the property and the plume, and his maintain- ing the first priority of the TD SDRSP mortgage and effectively preventing the companies from seeking and obtaining financing elsewhere to deal with the con- tamination in precedence to the protection of the environment." It's hard to say whether Ro- cha's financial interest is ulti- mately what led to the finding that he had management or con- trol, says Madras. "What the tribunal does say, and I think it's very important, is that there was, as the tribunal put it, a 'unique conf luence of management and financial control.'" Tidball says advisers aren't the only ones facing liability in environmental prevention and cleanup orders. In McQuiston v. Ontario (Environment and Cli- mate Change), a case in which he acted for one of the parties, the ministry issued a cleanup order against the directors of a real estate company that listed a contaminated site for sale in Fort Erie, Ont. In that case, the ministry found the broker, along with an accountant who had power of attorney over the property, had management and control of the site while it was up for sale. "It's a trend that should concern lots of people," says Tidball. LT FOCUS REACH ONE OF THE LARGEST LEGAL AND BUSINESS MARKETS IN CANADA! 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