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“When there is a dispute between certain persons, the duty of the government is to see that everything is done in the public interest. . .”

— Ontario Premier Frost, 1950(1)

On April 31, 1950, An Act respecting The KVP Company Limited received royal assent. With one stroke of the pen, the Ontario government wiped out an entire community’s property rights, and with them, citizens’ power to protect their river from an upstream polluter. The story of the KVP Act dramatically illustrates the significance of common law rights to clean water and governments’ willingness to override these rights in the name of the “public good.” It is a story about a community’s struggle for a clean river – a struggle against the pulp mill that dumped its wastes into it. The courts tried to protect the river; the government, concerned as always about jobs, protected the pollution.

The battle over the Spanish River began in 1946, when the Kalamazoo Vegetable Parchment Company (KVP) revived a long-dormant kraft pulp and paper mill in Espanola, Ontario. Other companies had operated earlier mills on the site, but impending bankruptcy had shut down the last – run by the Abitibi Power and Paper Company – in 1930. The site stayed inactive for the next 16 years, except for three, when it served as a prisoner- of-war camp.

During those 16 years, the Spanish River, assisted by nature, had thrived. A 1934 flood had flushed contaminants from the river, restoring prime habitat. By the 1940s, the abundance of game fish had made the river and its surroundings a popular tourist resort area.

The opening of the KVP plant in 1946 changed all that. The river began to smell. Repulsive odours, often likened to the stench of rotten cabbage, permeated the river’s 35-mile course to Lake Huron’s north channel; they were even detectable ten miles out into the channel. And in the winter, according to the provincial fish and wildlife overseer, a hole cut in the ice would release a smell that would “nearly knock you down.”(2)

KVP’s operations ruined the taste of this northerly river’s water. Farm animals found it repelling. People living beside the river could no longer draw their drinking water from it. Even boiled water tasted and smelled so bad that it couldn’t be used for cooking or washing.

Each day, the mill released between three-and-a-half and five tons of chemically contaminated wood fibres which lodged in the river bed, accumulated in large foul-smelling masses, and even-tually rose to the surface and drifted downstream. These stinking masses robbed the water of oxygen. Some blamed the river’s huge numbers of dead and dying fish on oxygen starvation. Whatever the reason, fishing declined substantially.

Sadly, much of KVP’s pollution was unnecessary. Kraft mills elsewhere used alternative methods – settling basins, for example – for effluent disposal. Before the mill had started up, a downstream landowner had urged its manager to pipe the effluent to sand flats nearby. But the manager had refused. “It is,” he had said, “a matter of economics.”(3)

Not surprisingly, those living downstream from the mill started complaining shortly after operations resumed. Supported by the downstream community and by local wildlife organizations, six men, all of whom owned land along the Spanish River, launched five lawsuits against KVP. One had a summer house on his property; several operated tourist camps; some farmed their land; and one, who owned a water lot on the river, was a commercial fisherman. All requested damages and an injunction. Their cases were tried together.

High Court Chief Justice McRuer found that the KVP Company had both violated the plaintiffs’ riparian rights and committed a nuisance. He awarded damages totalling $5,600 and issued an injunction prohibiting KVP from altering the character or quality of the water; he then suspended the injunction for six months to allow KVP time to find other means of disposing of its effluent. Seven months later, the Ontario Court of Appeal affirmed his decision.(4)

In his judgment, Chief Justice McRuer noted that KVP’s pollution had changed the river’s character. Riparian law, he explained, prohibits any such alteration; under the law, a person living beside a river has a right to the flow of water in its natural state. Whether or not the change causes damage, or interferes with someone’s water use, is irrelevant.

The Chief Justice rejected the all too common argument that the social benefits of an activity can justify pollution. KVP had long advanced this argument; as its manager had once asked a downstream landowner, “What are a few fish compared with what we are doing for the country?”(5) But the Chief Justice refused to take into consideration KVP’s economic importance. “In my view,” he explained, “if I were to consider and give effect to an argument based on the defendant’s economic position in the community, or its financial interests, I would in effect be giving to it a veritable power of expropriation of the common law rights of the riparian owners, without compensation.”(6)

Chief Justice McRuer also rejected KVP’s suggestion that an agreement with the government allowed it to pollute. A clause in the agreement stated, “No refuse, sawdust, chemicals or matter of any other kind, beyond that reasonably necessary for the opera-tion of the Company herein, which shall be or may be injurious to game and fish life shall be placed or deposited in any river, stream or other waters.”(7) The Chief Justice denied that this agree-ment amounted to a permit to pollute, explaining that legislation – not merely an agreement between the Crown and the polluter – would be required to deprive the plaintiffs of their rights.

The provincial government rose to the challenge, introducing legislation to crush the property rights of those living downstream from pulp and paper mills. Its amendments to the ludicrously named Lakes and Rivers Improvement Act empowered courts to consider the public interest before restraining a polluting mill: judges could refuse to grant an injunction if “the importance of the operation of the mill to the locality in which it operates and the benefit and advantage, direct and consequential, which the operation of the mill confers on that locality and on the inhab-itants of that locality” outweighed the private injury inflicted by the mill.(8)

The debate on the new legislation reeked of hypocrisy. The Attorney General defended the blatantly anti-environmental law with pro-environmental rhetoric. His government had done all in its power to cut down pollution, he claimed. “Our attitude towards pollution,” he said, “would be the same as our attitude towards sin. We are all against it.”(9)

Only one MPP argued that the legislature should preserve both property rights and the Spanish River. William Dennison, of the Co-operative Commonwealth Federation (CCF, the New Democratic Party’s predecessor), urged the government not to interfere in the KVP case: “I plead with the honourable Minister to do nothing in connection with this case which will affect the rights of these people who will take this company to the highest tribunal in the land, to get that pollution stopped.”(10) His plea fell on deaf ears.

The politicians trampled once-sacred property rights – and the environment these rights so effectively protected – because they feared that jobs were at stake. Believing KVP’s threats to close the mill – a position branded by some as “company bluff”(11) – they wanted to prevent the loss of 1500 jobs.

The politicians may have also feared that property rights threatened the entire pulp and paper industry. In its response to the court decision against it, KVP had promoted such a fear. “This is vital to us,” one company official had explained. “You just can’t run a sulphate 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 sulphate plants.”(12) At a time when troubles in the wood industry had left two to three thousand northern Ontarians out of work, the government felt a “public responsibility” to keep pulp and paper mills operating.(13)

Armed with the recent amendments to the Lakes and Rivers Improvement Act, KVP went to the Supreme Court of Canada, where it asked for a new trial on the issue of whether or not an injunction should be granted. On October 4, 1949, the court handed down its ruling: the injunction against the KVP pulp mill would stand. The court denied that the new legislation empowered it to overturn the injunction in this case. It could not, it explained, “give a judgment that was impossible in law at the time of the decision of the Court of Appeal.”(14)

Mr. Justice Kerwin noted that while the Ontario Judicature Act allowed courts to substitute damages for an injunction, courts had always zealously guarded riparian rights, including the right to an injunction. He cited an earlier judgment from the British Privy Council on the issue: “The grant of an injunction is the proper remedy for a violation of right according to a current of authority, which is of many years’ standing and is practically unbroken.”(15)

The judge reviewed the courts’ historical commitment to awarding injunctions; he attributed the tradition to a determination to avoid legalizing the violation of others’ property rights by anyone willing to pay damages. An injunction should be waived, he said, only if damages provided “a complete and adequate remedy.”(16) In the KVP case, damages could clearly not meet such a test. And so the injunction would stand, although it would be stayed for an additional six months. Six weeks later, the court refused KVP’s request for permission to apply for future extensions.

Undeterred, mill management, labour unions, and several municipal associations organized a major lobbying effort. Delegations from Espanola, carrying a petition from 2000 residents, visited political leaders, requesting that they dissolve the injunction against KVP. On February 6, 1950, Premier Frost assured one delegation, “Leave it to me!”(17)

True to his word, 18 days later the Premier informed the legislature of his intention to “take whatever steps may be necessary to bring about the continued operations of this company so that the employment conditions in Espanola shall not be disturbed and that the development of the community will not be retarded.”(18) Within a month the government introduced An Act respecting The KVP Company Limited to the sound of applause from the gallery. The act, as promised, would dissolve the injunction.(19)

Once again, legislators debated the act with considerable hypocrisy. Premier Frost prefaced his policy statement on the act with a paean to both environmental quality and individual rights: “[W]e do not regard lightly the matter of pollution of our streams. Indeed, we think it is a very serious matter. . . . We do not hold lightly the rights of individuals to protect their interests in the courts of this land. That is, in itself, a very important matter.”(20) The Premier later insisted, “The government is most desirous of doing everything possible to prevent the pollution of our lakes and streams.”(21) Everything, that is, but allow people to exercise their rights to clean water.

In defence of KVP, the Premier suggested that pollution is inevitable in modern society. “[W]e do recognize,” he said, “that in these days of industrialization and . . . increase of population in areas of the province that we are bound to get a certain amount of pollution in our lakes and streams.” Nevertheless, he assured his colleagues, “it is the policy of the government to keep any pollution at the lowest possible level.”(22)

As is still so often the case, jobs preceded environmental protection on the government’s agenda. The Attorney General frankly stated his position: “We are just not interested in preserving the quality of the water in the river as far as it is possible, as we are in preserving the means of employment for these people.”(23) He later elaborated on his government’s priorities: “[W]e sometimes have to balance the difficulties arising out of the interests of an industry, and all that that means, in providing employment and good living conditions for several thousands of people, and the ill effects which almost always follow when you have a civilized community living in a town or city. . . . [T]he development of the north country depends upon industry, and we cannot allow industry to close down.”(24)

Few MPPs raised objections to the proposed act. Several expressed revulsion over pollution from pulp mills around the province. The Leader of the Opposition warned of a time when companies, demanding special consideration, would hold the threat of job losses over the government and the local populace. But none advocated allowing KVP’s injunction to stand. Even William Dennison, earlier defender of individual rights, denied that the mill should be closed down; he instead proposed giving it five or ten years to clean up. And so An Act respecting The KVP Company Limited passed third reading on March 30, 1950, five days before the injunction was to have taken effect. It received royal assent a month later.

Unfortunately, the government’s protection could not assure KVP’s stability.(25) Since the Spanish River Pulp and Paper Company’s establishment in 1899, the mill at Espanola had lurched from one financial crisis to the next. Payroll problems beset the mill as early as 1914. Temporary shutdowns, layoffs, changes in ownership, and ultimately bankruptcy plagued operations in the following decades. Nor did things look up after the government rescued KVP in 1950. The mill was shuffled from one owner to the next. Brown Company, which purchased KVP in 1966, blamed the sharp drop in its earnings on the money-losing Espanola mill. In the late 1970s, E. B. Eddy (the mill’s current owner) required $25 million of government assistance. But even large federal and provincial grants could not ensure the profitability of the mill, which continued to run operating losses.(26)

Nor did government intervention improve the state of the environment. Although the KVP Act had required the Research Council of Ontario to develop methods to clean up the Spanish River, the pollution continued for many years, driving tourist operators out of business and taking its toll on commercial fishermen, farmers, and the general public.(27)

The mill’s successive owners promised to clean up the river, but reneged because of the financial costs of doing so. For example, in 1969, senior management told local citizens that E.B. Eddy “was not a Company with a magic wand or the millions needed to reduce the pollution of the Spanish River to zero.”(28) The company did begin to implement pollution reduction measures in the 1970s.(29) But not until the next decade (when the International Joint Commission declared the Lower Spanish River an Area of Concern) did cleanup begin in earnest.(30) Tragically, new abatement measures did not prevent 1983’s large chemical spill, in which 18,000 gallons of highly toxic ‘soap’ flowed from a holding tank into a sewer, and from there into the Spanish River. The spill killed over 120,000 fish.(31)

The KVP story justifies a postscript. After the passage of the KVP Act, Leslie Frost enjoyed another eleven years as Premier. Upon retiring from politics, he became a member of KVP’s board of directors.(32)

Notes

1. Ontario Premier Leslie Frost, Ontario Legislative Assembly Debates, February 24, 1950, A-9.

2. McKie et al. v. The K.V.P. Co. Ltd., [1948] 3 D.L.R. 201 at 206 (Ont. H.C.).

3. Ibid. at 219.

Several MPPs also insisted that KVP’s pollution was preventable. According to William Dennison, “there is a scientific method available whereby these companies can remove from the water they are dumping into the streams in that country, the chemicals and the sewage and the solids which pollute the streams, and they can recover a good deal of those chemicals, and use them over again, providing they are prepared to pay the price required for the equipment which does the job” (Debates, op. cit., March 29, 1949, 1457).

Another MPP, C. W. Cox, explained, “There is a remedy for pollution, and they are using it, in other places. . . . I have with me a rather comprehensive report issued by the Manager of one of the paper mills [in Wisconsin], in which he points out it is entirely feasible to solve the pollution problem, with respect to pulp and paper mills” (Ibid., March 23, 1950, B-3 – B-4).

4. McKie v. K.V.P. Co. Ltd. (1948), [1949] 1 D.L.R. 39 (Ont. C.A.).

The Court of Appeal reworded the injunction to read as follows: “This Court Doth Order and Adjudge that the Defendant be, and it is hereby, restrained from discharging or permitting to be discharged from the Defendant’s works mentioned in the pleadings, into the waters of the Spanish River, any substance or matter that, to the injury of the Plaintiff, affects the quality or character of the waters of the said River where the Plaintiff’s lands border upon it, or that causes the said waters to become less pure than otherwise they would be” (at 41-2).

5. Sudbury Daily Star, November 23, 1948.

6. McKie et al. v. The K.V.P. Co. Ltd., [1948] op. cit. at 214.

7. Ibid. at 218, emphasis added.

8. An Act to amend the Lakes and Rivers Improvement Act, section 39 (1) (a). The government introduced the act in February, 1949; it received royal assent on April 1, 1949.

9. Debates, op. cit., March 29, 1949, 1461, 2.

10. Ibid., 1459.

11. Morrison, Espanola on the Spanish, 171.

12. Sudbury Daily Star, April 16, 1948.

13. Attorney General Leslie Blackwell, Debates, op. cit., March 29, 1949, 1462.

14. The K.V.P. Co. Ltd. v. Earl McKie et al., [1949] S.C.R. 698 at 701.

15. Ibid. at 701-2, citing Stollmeyer v. Petroleum Development Company Limited, and Others, [1918] A.C. 485 (P.C.).

16. Ibid. at 703.

17. Morrison, op. cit., 171.

18. Debates, op. cit., February 24, 1950, A-10.

19. The act maintained people’s rights to bring legal actions against KVP, but limited possible remedies to damages. It also set up an arbitration mechanism to resolve disputes and assigned to the Research Council of Ontario responsibility for developing pollution abatement methods for KVP.

20. Debates, op. cit., February 24, 1950, A-5.

21. Ibid., A-8.

22. Ibid., A-6, A-8.

23. Dana Porter, Debates, op. cit., March 21, 1950, B-6.

24. Debates, op. cit., March 23, 1950, B-13 – B-14.

25. For the information in this paragraph I have relied on Morrison, op. cit., 10-11, 85-86, 182-5, 192-3.

26. Phil Hearn, E. B. Eddy, personal communication, May 10, 1993. Mr. Hearn said he thought that the mill had lost money in two of the last three years. George Weston Limited’s 1992 Annual Report confirms that E. B. Eddy Paper and Forest Products ran operating losses in 1991 and 1992. It does not, however, provide specific figures for the Espanola mill.

27. Morrison, op. cit., 171-2, 183.

28. Ibid., 192.

29. The measures were not entirely effective, however. In a 1988 decision regarding E. B. Eddy, a provincial court justice noted that the mill continued to pollute the Spanish River. Under both start-up and operating conditions, he said, the mill “usually and normally” discharged deleterious substances (R. v. E. B. Eddy Forest Products Limited (1992), 5 F.P.R. 63 at 87).

30. For information on improvements made in the 1980s, see Ontario Ministries of the Environment and Natural Resources and Environment Canada, Status Report, Spanish River – Harbour Area, Remedial Action Plan (RAP), 1-12.

31. Michael John Powell, regional fisheries biologist for the Ministry of Natural Resources, provided this estimate at the trial of R. v. E. B. Eddy Forest Products Limited, op. cit. at 74.

32. Morrison, op. cit., 171.

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