Canada SC | Companies are responsible for the cost of complying with environmental orders, not the government

Supreme Court of Canada: A Full Bench of Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe and Martin, JJ. allowed the present appeal.

In the present case, there was a pulp and paper mill that produced chemicals to bleach the paper by using mercury and waste was dumped into rivers. The mercury poisoned people. In 1977, two First Nations bands sued for damage from mercury contamination. First, the mill was owned by a company called Reed. Great Lakes Forest Products, was interested in buying the properties but because of the lawsuit, it didn’t want to be held responsible for past pollution. The provincial government wanted the sale to go through therefore it gave indemnity to great lakes. The sale, with the indemnity agreement, went through in 1979.

The present case involved contamination of a river by a pulp and paper mill which was owned by Reed company. Another company,  Great Lakes Forest Products,  Thus First Nation Band sued for the discharge of mercury. In 1985 the lawsuit ended and the government gave Great Lakes and Reed a new indemnity covering all claims for previous pollution damage. It covered all claims due to previous pollution damage, including the mercury. It replaced the one from 1979 (and another from 1982). It applied to anyone who might take over the mill later. In 2009, Bowater owned the waste disposal site, and filed for bankruptcy. As part of this process, a court allowed it to abandon the site in 2011. But the Ontario Ministry of the Environment said Bowater and Weyerhaeuser (the previous owner) still had responsibilities. It ordered them to repair the waste disposal site, keep monitoring and testing, and take steps to prevent and deal with leaks.

The appellant Weyerhaeuser and Bowater (Resolute Forest Products) contended that the indemnity from the 1985 settlement applied to the order and the provincial government had to pay for all the costs of complying. 

The majority of judges at the Supreme Court said the indemnity didn’t apply to the order. That meant Resolute and Weyerhaeuser had to cover the costs of complying with it. It was observed that the 1985 agreement didn’t say the government would cover the company’s costs of following environmental rules. It also wasn’t meant to cover claims between the government and the company. It was only supposed to cover claims by third parties i.e. people who didn’t sign the agreement.

It was also observed that the indemnity referred to “pollution claims.” But this wasn’t a pollution claim. There were no leaks and so no new pollution had happened as said by the motion judge. The order was about monitoring and testing to prevent more pollution. The majority said the indemnity was meant to cover claims for new pollution or for mercury already present in the environment from before. It didn’t mean claims for the mercury safely contained in the waste disposal site. 

Therefore it was declared that Weyerhaeuser enjoys no benefit under the Ontario Indemnity and held that the companies can still be responsible for following environmental rules even when they go bankrupt and hence the court allowed the appeal of Resolute. [R. v. Resolute FP Canada Inc., 2019 SCC OnLine Can SC 59, decided on 06-12-2019]

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