Stuart Norris
September 2, 2010

Many industrial processes create pollutants as by-products and emit them into the surrounding environment. In some cases, these pollutants find their way onto the property of land owners in the area, causing damage to their property and interfering with their enjoyment of it. In these cases, the affected property owners will often ask the courts to issue injunctions preventing the harms from continuing or to award compensation for the harms that they have suffered.

In 2005, a group of residents in Port Colborne, Ontario, was certified as a “class” with common issues for the purpose of such a lawsuit against Inco – the Canadian nickel giant now owned by the Brazilian mining company Vale. The residents claimed that emissions from Inco’s Port Colborne nickel refinery had rendered the soil in the area potentially unsafe, and that the disclosure of these emissions had lowered property values in the area. In July 2010, Mr. Justice Henderson of the Ontario Superior Court of Justice found that Inco had created a private nuisance and ordered it to compensate the local residents for the loss in value that they had suffered.

This was not the first time that Inco had been challenged in court because of the environmental consequences of its activities. Inco was born as the International Nickel Company, Ltd. in 1902, when rich nickel deposits were discovered near Sudbury, Ontario, by the already existing Canadian Copper Company. In 1917, a group of farmers in the Sudbury area launched a suit against Canadian Copper, which owned Inco at the time, alleging that sulphur dioxide in the smoke and vapours from the smelting facilities of Canadian Copper had damaged their crops. The farmers originally sought an injunction preventing Canadian Copper from continuing to pollute the area. In his decision, the trial judge held that the mining industry was so essential to the local economy that an injunction should not be handed down against it, but that instead, damages, “liberally estimated,” should be awarded.

The Ontario Legislature, concerned about a spate of actions against Canadian Copper and other smelters, apparently took these words to heart. In 1921, it passed The Damage by Fumes Arbitration Act, which prohibited claims against sulphur polluters from entering the courts and limited recovery to damages for those claims. The Damage by Fumes Arbitration Act survived for fifty years, in various forms, until it was repealed in 1970.

This legal protection helped Inco become one of the worst polluters in Canada. Now, though, the company has been ordered to pay $36-million to residents in the Port Colborne area, for the loss of value suffered to their property when it was disclosed that nickel particle emissions had accumulated in potentially unsafe levels in the local soil. The claim arose after a series of tests were conducted by the Ministry of the Environment in 1998. When the results of these tests revealed the level of nickel in the soil, a series of town hall meetings resulted in the decision to launch a class-action suit.

At trial, Inco argued that the residents were too late to file their claim, because a six-year limitation period on the claim had already expired, Inco having ceased refining nickel in the area in 1984. However, the trial judge held that the cause of action in this case did not arise until the year 2000, when the level of nickel contamination was publicly disclosed, and so the six-year limitation period did not start until that time.

The plaintiff class filed against Inco for three causes of action: trespass, nuisance, and the doctrine of strict liability set out in Rylands v. Fletcher, an English House of Lords decision from 1868. According to this decision, “the person who, for his own purposes, brings on his land and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril; and if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape.” According to the Rylands doctrine, any non-natural use of the land can give rise to liability in the event of an escape, regardless of whether the defendant exercised reasonable care.

The trial judge held that Inco was not liable in trespass, but he did find that Inco had created a private nuisance, as well as finding fault based on the doctrine of strict liability (the Rylands doctrine). That case originally involved a defendant who kept a water reservoir on his property. When the reservoir leaked, the ensuing rush of water flooded his neighbour’s property. In the Inco case, the defendants claimed that the Rylands doctrine should not apply, because that principle was limited to an isolated escape, while nickel particles were being emitted from the Inco plant on an ongoing basis. The trial judge rejected this argument, holding that if a single escape of a potentially dangerous substance was bad, multiple ongoing escapes must logically be worse.

Given the attitude held in the past by Canadian courts towards Inco, and the mining industry in general, one cannot help but wonder how the case might have been resolved if Inco had still been refining in the Port Colborne area. Would an injunction have been granted, or would the importance of the nickel industry to the Canadian economy still trump the property rights of local land owners?

Another question concerns the amount of compensation awarded in the case. Some critics have taken issue with the methods used to calculate the loss of property value claimed by the plaintiff class. The real estate market is complex, and it is not easy to tell whether the fact that property values did not rise as much as expected is due to the disclosure of nickel emissions, or some other, more intangible factor.

Furthermore, it remains to be seen if the decision of the Superior Court of Justice will be upheld. Inco filed a Notice of Appeal in August 2010. [Editor’s note: The appeal is scheduled to be heard by the Ontario Court of Appeal in May 2011.] Given the stakes, the case could potentially reach the Supreme Court.

Environmental advocates are nevertheless enthusiastic about the decision, and the possibility that it signifies increased deference to the property rights of those living in the vicinity of industrial polluters. If the decision is upheld, it could give rise to more high-profile, high-damage cases. Environmental lawyer Dianne Saxe has suggested that the Alberta oil sands are a potential target, as fumes and emissions from those facilities are reported to have adversely affected downwind property. It remains to be seen how the appeal will play out, but future developments are sure to be interesting.

Stuart Norris, a law student at the University of Western Ontario, wrote this article for Environment Probe.