Protecting the Environment with Property Rights: The K.V.P. Story

Rachel Szymanski
August 14, 1992

The controversy surrounding the K.V.P. pulp and paper mill in the 1940s dramatically illustrates both property owners’ common law rights to clean water and governments’ tendency to override these rights. Three court cases and two laws involving K.V.P. concerned the right of landowners to sue the company for polluting the river adjacent to their land. A brief explanation of “riparian rights” will clarify these cases and the subsequent events.

Riparian Rights

Riparian rights are common law rights available to any property owner whose land borders on a waterway, such as a lake or river. Riparian law entitles such landowners to the natural flow of water beside or through their land, without any significant change in the quantity or purity of the water. Any activity that alters the water, or that reasonably threatens to do so, entitles the landowner to the intervention of the court. If the court finds in favour of the landowner, it may provide in way of remedy an injunction (actually banning the polluting activity), or monetary damages, or both.

Unlike other common law property rights that are also available to a landowner in this situation, legal action taken against a polluter on riparian rights grounds does not require any actual damage to the water, only a reasonable anticipation that damage may occur. Another attractive element to the riparian rights doctrine is that the property rights of a “riparian owner” to clean water are always weighed in favour of any other social concern that may accompany the polluting, such as a speedboat regatta to raise money for charity, or a pulp and paper mill that provides income to a community.

In theory, then, riparian rights provide enormous legal power to landowners who are interested in maintaining the purity of the water adjacent to their property. In practice, however, the situation is not quite so clear-cut. As the legal history of the K.V.P. Company will demonstrate, these private common law rights can be heavily compromised by the force of political pressure.

The K.V.P. Lower Court Decisions

The trilogy of cases involving the K.V.P. Company concerned the ability of landowners to sue a pulp and paper mill for polluting the river adjacent to their land. A group of six plaintiffs, all owners of land bordering the Spanish River near Sudbury, brought separate legal actions against a pulp and paper mill located upriver in Espanola, which manufactured kraft paper by a sulphate process. For the sake of convenience, the landowners’ actions were grouped together by the courts. All the plaintiffs operated tourist camps along the river, and one was also a commercial fisherman. They sued the mill owner for financial damages suffered due to the pollution, and for an injunction restraining the company from polluting in the future. All the plaintiffs provided evidence that they had suffered monetarily from the polluting of the river, although, as was mentioned above, it is not necessary to prove actual damage if you are the holder of riparian rights, merely a “reasonable” fear that damage may occur. Both remedies of injunction and monetary damages were awarded by the lower court judge to the landowners, and this decision was affirmed by the Ontario Court of Appeal.

The Supreme Court Decision

The K.V.P. Company did not appear to be troubled with the monetary damages it was forced to pay out to the landowners. (This is not surprising, given how low the awards were: they varied from $300 to $2,100.) Rather, what gave rise to subsequent legal fireworks was the court order restraining the company from discharging into the Spanish River any substance that would injure the purity of the waters.

K.V.P. appealed to the Supreme Court of Canada, arguing that the damages it paid to the landowners were sufficient, and that the injunction shutting down the plant should be lifted. The company largely based its argument on a new change to the Ontario Lakes and Rivers Improvement Act. While K.V.P.’s appeal to the Supreme Court of Canada was pending, the Ontario legislature, presumably faced with significant political pressure, amended this act to suit the economic needs of Espanola, whose population was heavily dependent on the continued livelihood of “virtually the sole employer in the community” (Sharpe, Injunctions and Specific Performance, 1983, p.197). The newly amended law expressly instructed courts facing cases similar to K.V.P. to balance the interests of Ontario pulp and paper mill communities with those of the individuals complaining of property damage suffered as a result of paper industry polluting.

The Supreme Court rejected K.V.P.’s argument, however, and held that the injunction should be maintained. Among other reasons, the court held that the company’s argument based on the newly amended Lakes and Rivers Improvement Act was inapplicable for legal procedural matters; the changes to the Act had not been made at the time of the Court of Appeal decision, and therefore could not be brought to the attention of a higher court.

Although the Supreme Court upheld the injunction, it is important to note that this court order was nevertheless “suspended” or delayed for six months. Robert Sharpe, who has commented at length on the judicial technique of suspended injunctions, observes that such a practice has become commonplace for courts, which attempt to soften the economic blow such a harsh legal remedy might have on an industry or a community (ibid., p.193). This is certainly the case in K.V.P., where the Supreme Court delayed the injunction in order to provide the mill with the opportunity to find some method of devising less polluting ways of doing business. Expert testimony heard during the trials indicate that such technology was indeed available to K.V.P. fifty years ago. Dr. Downe, who testified for the landowners, told the media following the court of appeal decision, “[t]here is no need for the river to be polluted . . . I suggested they put in tanks and process the waste a year before the plant was opened” (Sault Ste. Marie Daily Star, November 23, 1948, pp. 1-3). As history goes, however, there was no need for the mill to go to this trouble, because the province responded to the injunction by implementing a second law that would effectively nullify the court order.

The law introduced in reaction to the court decisions is even more transparent in terms of indicating the interests and priorities of the Ontario government. As was noted above, the first governmental attempt to defy the injunction via an amendment to the Lakes and Rivers Improvement Act was rejected by the Supreme Court for procedural reasons. Following this decision, the Ontario legislature, acting quickly, implemented a much more specifically worded statute directed at keeping the K.V.P. mill open. The K.V.P. Company Limited Act (1950, c. 33) effectively lifted any injunction imposed on the company restraining it from polluting the waters of the Spanish River. As a result, only a remedy of damages would be available to any landowner who wanted to sue K.V.P. Since the original six landowners had already received an award for damages, no further action was taken on their part to sue the company. Moreover, no subsequent legal actions were taken by other landowners in response to K.V.P.’s polluting.

Familiar political tactics likely prompted the K.V.P. Company Limited Act. In a press statement following the first court decision, K.V.P. officials argued that “[y]ou just can’t run a sulfate plant without a very large amount of effluent, in the form of a liquor. To handle this effluent like you would an ordinary disposal plant where the stuff is filtered, is a far bigger problem than most people realize. It is very important to the whole industry, not only our plant, but all other sulfate plants” (Sault Ste. Marie Daily Star, April 16, 1948, pp. 1-2). By putting forth the interpretation that the K.V.P. decisions signaled a universal threat to an entire provincial industry, the company effectively succeeded in overriding private water rights that had been fiercely protected by the courts for centuries.

Ontario is the only province in Canada that has yet to directly legislate against riparian rights, which continue to be used to this day by landowners who are concerned about protecting the purity of the waters flowing next to their property. The legal history of the K.V.P. Company indicates, however, that what the legislature has not done directly, it has nevertheless managed to accomplish indirectly.

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