Make polluters pay! Back off government!

Elizabeth Brubaker
C2C Journal
June 29, 2011

“This land is our land. Back off government.” That’s the slogan of the Ontario Landowners Association, an organization devoted to protecting property rights. For the OLA, property rights are primarily swords – weapons in their war against environmental laws and regulations that restrict their use of their property.

But there’s another side to the property rights story. Property rights have historically served as shields, protecting landowners from pollution and other disruptions caused by their neighbours. When governments don’t stand in their way, people can continue to use their property rights to shield themselves from harm.

Consider these recent court cases:

In February 2008, the Ontario Superior Court of Justice determined that a couple living in the Niagara Region had violated their neighbours’ property rights by “incompetently and offensively” using a wood-burning stove in their garage. Thick, acrid smoke from the stove often blanketed nearby properties. Neighbours could not use their yards or leave their windows open. Smoke disturbed their sleep and irritated their eyes and lungs. The judge who heard the case found the burning to be a classic nuisance – “a severe interference with the use and enjoyment of the property.” He awarded damages totalling $100,000, plus legal costs. He also extended an injunction that had earlier been issued against the use of the stove.

Later that year, a higher court took on a bigger polluter. The Supreme Court of Canada confirmed that emissions from the St. Lawrence Cement plant in Beauport, Quebec, had violated the rights of 2,000 neighbours. The company had operated in accordance with relevant standards, and had invested in environmental protection equipment. Nevertheless, dust, noise, and foul odours from its plant had caused excessive annoyances that prevented neighbours from enjoying their property. These annoyances “were beyond the limit of tolerance neighbours owe each other.” The Court reinstated a lower-court judgement awarding about $15-million in damages.

Last July, another Superior Court judge in another case further raised the stakes. He ruled that pollution from Inco’s refinery in Port Colborne, Ontario, had violated the property rights of approximately 7,000 residential property owners. Nickel particles emitted over many decades had contaminated soils in the vicinity of the refinery. In 2000, public disclosure of the contamination had reduced the values of affected properties. The judge ordered the mining giant to pay $36-million in damages. (Inco has appealed the decision. The appeal was scheduled to be heard May 9-13 – just after this article had gone to press.)

Meanwhile, more than 400 people living near the Sydney Tar Ponds are waiting to learn if they will be recognized as members of a “class” in order to sue Sydney Steel and the federal and provincial governments for exposure to pollutants from the now-closed Sysco steel mill, coke ovens, and tar ponds. Neighbours of the infamous toxic waste site on Cape Breton Island claim that successive operators of the steel plant and coke ovens emitted smoke, dust, and effluents that contaminated the air, soil, and water and that damaged their health and their property. The releases interfered with their use and enjoyment of their lands and homes, they claim, and constituted an intolerable nuisance.

These contemporary cases have relied on common-law doctrines that predate modern environmental statutes and regulations by centuries. All have made reference to the law of nuisance, at the heart of which is a maxim that can be traced back to the English law of the Middle Ages: Use your own property so as not to harm another’s.

The rule that one must use one’s property in ways that do not harm others infuses both the Canadian common law and Quebec’s civil law. Indeed, in its St. Lawrence Cement decision, the Supreme Court cited a passage from a 1954 judgement from the Quebec Court of Appeal: “The right of owners to use their things as they see fit entails an obligation not to exercise that right in a manner that prevents neighbours from enjoying their own property.”

But neighbours do not have an absolute right to enjoy their property, any more than they have an absolute right to use it. Rights, as the Supreme Court noted, may be limited by the existence of others’ conflicting rights, by statutes and regulations introduced by governments, or by the finely tuned mechanisms that have evolved with the common law.

The Supreme Court discussed the factors that courts take under consideration in balancing competing rights. Nuisance, it explained, is an unreasonable interference with the use of land:

“The interference must be intolerable to an ordinary person. This is assessed by considering factors such as the nature, severity, and duration of the interference, the character of the neighbourhood, the sensitivity of the plaintiff’s use and the utility of the activity. The interference must be substantial, which means that compensation will not be awarded for trivial annoyances.”

Despite these restrictions, common-law property rights remain powerful tools for environmental protection. They are attractive for ethical, economic, and pragmatic reasons. Liability rules, environmental lawyer Lucas Bergkamp has written, “shift a loss from the person initially suffering it to another person that is responsible for it.” Those who benefit from an activity compensate those they harm. What could be more fair? And what could be more effective? By “internalizing” the costs of harming others, property rights regimes create powerful incentives to minimize such harm. In the words of law professor Michael Trebilcock, “apart from the purely compensation function, law and economics scholars more or less universally view the purpose of damage awards as creating appropriate incentives to take precautions on the part of injurers to avoid accident costs to potential victims.” Property rights rules embody the polluter-pay principle – a principle, explained the Supreme Court of Canada, that “assigns polluters the responsibility for remedying contamination for which they are responsible and imposes on them the direct and immediate costs of pollution.” The purpose? “To encourage sustainable development.”

Property rights regimes are often superior to government statutes and regulations. Common-law rules ensuring that polluters fully compensate their victims for the harm they have caused contrast with most environmental statutes, under which fines for wrongdoing go in whole or in part to government coffers. Also in contrast to most statutes, common-law property rights provide victims opportunities to obtain injunctions against polluters – in the most extreme cases, to shut down operations entirely if they cannot be conducted without harming others. Victims need not enforce their injunctions. They may prefer to bargain with polluters – to negotiate mitigation and compensation measures that suit all of the parties to the disputes. These solutions will be unique to each case, unlike the one-size-fits-all rules imposed by most statutes and regulations.

The case against the Sydney Tar Ponds illustrates another great advantage of the court-made common law over government-made statutes. The former is likely to be more effective in such cases, where governments are themselves defendants. In 1968, the provincial and federal governments created Crown Corporations to own and operate the steel mill and coke ovens, respectively. They were directly responsible for much of the contamination. If their neighbours are correct, they “knowingly compromised the interests of [local residents], solely for the purpose of monetary gain and political expediency.” Surely such governments are compromised and will be reluctant to pass laws to hold themselves accountable for their past actions. Only courts can be sufficiently independent to assess such cases fairly.

Alas, common-law courts can’t entirely get around the problem of governments wanting to protect polluters – public or private – for financial or political reasons. Governments can pass laws authorizing harms. Such authorizations override the common law. As a British law lord wrote in 1901, in a decision concerning damage caused by the Canadian Pacific Railway Company, “The Legislature is supreme, and if it has enacted that a thing is lawful, such a thing cannot be a fault or an actionable wrong.”

In the last century, governments have taken full advantage of their power to override common-law restrictions on pollution, thereby undermining the property rights of those adversely affected by the pollution. In order to promote growth and to protect the economic interests of favoured industries and those employed by them, they have limited the liability of a host of polluters. In some cases, they have instructed courts to consider the economic consequences of ruling against polluters. In others, they have overturned court-ordered injunctions or forbidden courts to issue injunctions. In still others, they have imposed limits on the damages courts may award. And they have taken entire classes of disputes out of the court system altogether, redirecting them to administrative bodies. Liability limitations have benefited railroads, sawmills, smelters, pulp mills, sewage polluters, miners, and, more recently, farmers. Even potentially catastrophic accidents, such as those related to oil and gas production and shipping or nuclear power generation, are covered by rules limiting common-law liability.

And yet, common-law property rights survive, demonstrating remarkable resilience in the face of such opposition. Many lawyers expect citizens to rely more heavily on their common-law rights in the future. Writing about the St. Lawrence Cement ruling, lawyers at McCarthy Tétrault predicted that it “is likely to serve as a catalyst for lawsuits filed by citizens against industries due to the annoyances caused by their activities.” Environmental lawyer Ian Richler warned that sewage pollution could be a target: “Municipalities with wastewater treatment plants in heavily populated areas should take heed.” The ruling against Inco likewise prompted speculation about further lawsuits. Environmental lawyer Dianne Saxe called the decision “hugely important. If it stands, it will open the door to similar lawsuits across the country against industries and municipalities for historic contamination.” Ms. Saxe identified the tar sands as a likely target. Those living downwind, she speculated, “should be able to do one hell of a class action.”

Even modest nuisance cases can spur more of the same. The wood stove case described above gave hope to an Amherstburg couple who were suing their neighbour for nuisance related to smoke from his wood-burning stove and brick oven. “This is the precedent we were looking for,” they told the press. “Now we don’t have to be first.”

It is all-too-possible that governments will respond to a new spate of nuisance cases by specifically authorizing more disputed activities. Ruminating over a recent case concerning the disruptive construction of a rapid transit line linking the Vancouver International Airport to downtown Vancouver and Richmond, Ms. Saxe wrote, “With billions of dollars’ worth of infrastructure projects underway across the country, will we see an equally large wave of nuisance claims? And if so, will governments legislate them away, rather than leaving the claims to multiply in the courts?”

In the Vancouver case, a judge had awarded $600,000 in damages to compensate the owner of a maternity-wear store for business lost during three years of disruptive construction – construction that substantially interfered with the business’s use and enjoyment of its premises and thus constituted a nuisance. The consortium building the line had used the “cut and cover” construction method, working in an excavated trench instead of in a bored tunnel. This method was $400-million cheaper than the alternative, but it was also more disruptive.

The judge acknowledged that modern life – especially in crowded urban environments – requires some give and take. Individual interests inevitably clash, and everyone must put up with some annoyance and inconvenience. The “live and let live” principle must govern minor inconveniences. And yet, he went on, “The ultimate question remains: does the balancing involved in a ‘give and take’ or ‘live and let live’ analysis for the purpose of identifying compensable nuisance require a single enterprise to absorb an undisputed business loss of more than $500,000 for the benefit of the public as a whole in order that some or all of the defendants may reduce the cost of construction? In my opinion, the answer can only be no.”

In February of this year, the B.C. Court of Appeal overturned that decision and set aside the damage award. The Court of Appeal agreed that the construction method, and the traffic disruptions it required, had caused a nuisance. But it determined that the consortium had statutory authority to use this construction method and therefore could not be held liable under the common law.

But the “ultimate question” still remains: Should a single enterprise – or even a dozen, or a hundred – absorb a loss for the benefit of the public as a whole? Should the government’s authorization of an activity require those adversely affected by it to disproportionately shoulder its costs? The courts have wrestled with the question of who should pay for authorized activities for more than a century. In a famous 1869 decision concerning vibrations from a railroad, one British law lord argued eloquently – albeit unsuccessfully – for full compensation:

“Admitting that the damage must be done for the public benefit, that is no reason why it should be uncompensated. It is to be remembered that that compensation comes from the public which gets the benefit. It comes directly from those who do the damage, but ultimately from the public in the fares they pay. If the fares will not pay for this damage, and a fair profit on the company’s capital, the speculation is a losing one, as all the gain does not pay all the loss and leave a fair profit. Either, therefore, the railway ought not to be made, or the damage may well be paid for.”

Courts will continue to grapple with environmental issues, and the common law will continue to evolve. In applying ancient principles and historical precedents to new problems, courts will almost certainly maintain the deep respect for property rights that has characterized their decisions for hundreds of years. It is governments – not property rights – that environmentalists should fear. Those wanting to see a cleaner environment should unite with those whose primary goal is stronger property rights in saying, “Back off government”!

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