Chapter 6: The Defence of Statutory Authority

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“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.”

-Lord Halsbury, 1901(1)

On June 26, 1970, Canada’s deputy Governor General gave royal assent to An Act respecting civil liability for nuclear damage. In so doing, he perpetrated one of Canada’s greatest insults to both property rights and the environment.(2)

The Nuclear Liability Act completely exempts nuclear designers, manufacturers and suppliers, such as Westinghouse and General Electric, from any financial liability resulting from a nuclear accident – even if the accident is caused by their negligence or wilful wrongdoing. Under the act, a manufacturer who falsifies safety documents or a supplier who knowingly sells defective equipment remains immune from civil lawsuits brought by accident victims.

The act also protects the operators of nuclear generating stations. It limits their liability to $75 million per station, which, as Chernobyl’s billions of dollars of damages so dramatically illustrate, falls far below the potential costs of a major accident. In fact, a severe accident at a Canadian reactor could be expected to cost between $375 million and $75 billion.(3)

The act limits the period in which the victims of smaller accidents may file claims to within ten years of the accident – even though cancers and genetic abnormalities would often take decades longer than that to show up.

Furthermore, the act restricts victims’ access to the courts. If, after an accident, claims are expected to exceed $75 million, victims must take their claims not to court but to a special commission that would decide how to divide the available compensation. Parliament could – but would not be required to – step in and allocate tax dollars to pay some of the claims. If no additional funds were allocated, victims who could have collectively lost a billion dollars could recover just $75 million, or seven cents on their dollar.(4)

In short, the Nuclear Liability Act deprives people harmed by a nuclear accident of their common law rights. In the absence of the act, nuclear operators would be fully liable under a branch of nuisance law named after the famous nineteenth-century case of Rylands v. Fletcher.(5) In that case the court ruled that “the person who for his own purposes brings on his lands 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.”(6) The rule under Rylands v. Fletcher would internalize the costs and risks of nuclear power; it would ensure that utilities assumed financial responsibility for the consequences of their chosen method of electricity generation. In contrast, under the Nuclear Liability Act, the victims and the taxpayers will end up sharing the vast bulk of the costs of any severe accident. Tragically, in shifting financial responsibility for a nuclear accident, the act increases the likelihood of one occurring. Protection from liability reduces incentives to prevent accidents. Safety measures cost money, and electric utilities, under pressure to minimize costs, must find it hard to justify large safety expenditures if their liability is limited. Furthermore, protection from liability lowers the costs of nuclear power, thereby encouraging utilities to build more reactors (instead of safer alternatives) and increasing the level of this dangerous activity.(7)

Why would Parliament pass such an outrageous law? Although the federal Liberal government couched the bill’s introduction in rhetoric about “protection for the people of this country,”(8) it failed to obscure its real goal: protection of the nuclear industry. It admitted, “the fear of being held liable for radiation injury could cause anxiety, for example, to manufacturers of equipment used in nuclear installations about the possibility of being exposed to exceptionally large damage claims.”(9)

The opposition parties seemed to agree that such anxiety would not serve the public interest. Clean, cheap nuclear power, described by one Progressive Conservative MP as “a double boon for mankind,” offered “an opportunity we cannot afford to miss.”(10) An MP from the New Democratic Party added that Canada was becoming increasingly dependent on nuclear energy – an energy which could soon drive planes and even cars.(11) Someone had to accept responsibility for the risks associated with this growing industry. Insurance companies, well aware of potentially gargantuan costs, refused to bear unlimited risk. And so, the MP concluded, the risks and costs of an accident would fall on the public’s shoulders: “Whenever disasters of this kind take place the public, through taxes and other disaster measures, are required to pick up the tab.”(12)

Governments have long asked taxpayers and the affected public to pick up the tab for the environmental harm wrought by industry. In order to do so, they have had to override or modify the common law with statutes and regulations enabling polluters to violate others’ property rights with impunity.

Thus governments have given polluters who are challenged in court a prized defence: “the defence of statutory authority.” The courts’ long-standing familiarity with those five words illustrates the consistency with which governments have legalized nuisances over the last two centuries, indemnifying polluters from liability for what would otherwise be actionable wrongs.

Courts, in determining whether governments have indeed indemnified particular activities, generally distinguish between permissive and mandatory statutes. Under the former, which maintain industries’ discretion over operating methods and locations, industries are expected to act in conformity with private property rights and cannot claim the defence of statutory authority. For example, a company’s obligation to maintain a highway cannot justify its use of damaging road salt when instead it could have used a harmless de-icing agent. Similarly, the right to generate electricity does not authorize a company to create a nuisance; it must choose a generating method and location that will not interfere with others’ property rights.

It is when the harm is an inevitable consequence of a legislatively authorized activity that a polluter can claim the defence of statutory authority. In mandating an activity or authorizing something to be done in a specific manner or location, the reasoning goes, the legislature sanctions all of its unavoidable consequences, including those that would have previously been forbidden. This is based on the principle of law that “he who grants something is deemed to also grant that without which the grant would be worthless” (in Latin, cuicunque aliquis quid concedit concedere videtur et id sine quo res ipsa esse non potuit).(13) Without legislative protection from liability, people would retain their right to challenge in court the inevitable results of statutorily authorized activities; legal actions could lead to injunctions against offending activities, thus thwarting the will of the legislature. Not surprisingly, legislators have written the laws – have set the rules governing the courts, in other words – so as to avoid that outcome.

Two judges of the Supreme Court of Canada have recently questioned the wisdom of the inevitability test, and with it the value of the defence of statutory authority. Chief Justice Dickson concurred with Mr. Justice La Forest that inevitability itself should not excuse exemption from tort liability. The fact that an operation will inevitably damage some individuals does not explain why those individuals should be responsible for paying for that damage. “Arguments about inevitability,” the judges agreed, “are essentially arguments about money. . . . ‘[I]nevitable’ damage is often nothing but a hidden cost of running a given system.” Their conclusion? “The costs of damage that is an inevitable consequence of the provision of services that benefit the public at large should be borne equally by all those who profit from the service.” The judges added that requiring the body that provides a service to bear the costs of its operations could serve as a valuable deterrent: “[I]f the authority is to bear the costs of accidents . . . it may realize that it is more cost-effective to forestal [sic] their occurrence.”(14) Unfortunately, the judges do not seem to have succeeded in weakening the almost universal respect that the defence of statutory authority has enjoyed for over 200 years.

Although government-authorized nuisances are as old as the rights they violate, they long remained exceptions to the rule. Medieval mining regulations provide some of the earliest examples of governments overriding common law property rights. In the thirteenth century, several revenue-hungry European governments vigorously promoted mining. They gave miners free land and exempted them from military service. Many of the miners’ perks came at the expense of local landowners: the governments encouraged miners to prospect on private property, allowed them to cut privately owned trees, and authorized them to divert streams. To ensure that the miners’ victims couldn’t fight back, the governments freed the miners from the jurisdiction of local magistrates.(15)

Government-sanctioned property rights violations became more common in the late eighteenth century when American governments passed a series of Mill Acts in order to promote their favoured form of economic development. Designed to encourage the construction of mills and to protect mill owners from expensive lawsuits, they permitted the owners to flood neighbouring lands. Although they provided for monetary compensation, they deprived victims of the rights to injunctions, punitive damages, or self-help actions that they would have otherwise enjoyed under the common law of trespass or nuisance.(16)

British acts of that era likewise protected certain ventures from common law liability. As early as 1792, the courts determined that the public interest warranted indemnifying public works authorized by Parliament. As the Chief Justice explained in that year, without liability exemptions “every Turnpike Act, Paving Act, and Navigation Act would give rise to an infinity of actions. . . . Some individuals suffer an inconvenience under all these Acts of Parliament; but the interests of individuals must give way to the accommodation of the public.”(17)

Some of the most dramatic early illustrations of statutory authority can be found in the British, American, and Canadian laws protecting railway companies from common law liability. Railways, the first of which were chartered in Britain in the late 1820s, mushroomed in the following decades; the British Parliament authorized the construction of over 400 between 1844 and 1846.(18) As steam locomotives became commonplace, their noise, vibration, and smoke, along with the danger of fires set by escaping sparks, became frequent problems.

Lawsuits involving nuisances caused by trains were common. A British innkeeper complained that the vibrations from trains passing through a nearby tunnel ruined the beer stored in his cellar.(19) A New York riparian sought damages when a railroad bridge caused his land to flood.(20) The owner of an English cotton mill complained that the danger of sparks flying from engines travelling the adjacent railway required him to purchase costly insurance and reduced the value of his property.(21) A New Brunswick farmer sought compensation for a barn lost to a fire started by the local train.(22)

It rapidly became apparent, however, that the legislation authorizing the railways had overridden people’s common law rights to stop such nuisances. Those harmed could not expect the courts to issue injunctions against the railway companies; in fact, unless the legislation so provided, they couldn’t even count on being financially compensated for their losses.

Rex v. Pease, an 1832 English case in which users of a highway complained that the noisy, smoky locomotives on an adjacent railway line alarmed their horses and caused accidents, established the extent to which governments had immunized railway companies from liability for the damages they caused. The railway company defended itself on the grounds that Parliament, in authorizing its operations, undoubtedly took into consideration – and therefore tacitly authorized – the nuisances caused by steam locomotives. It likely did so, the company added, because locomotives served a public interest by facilitating the cheap transport of coal; the benefits of highway use, in short, should “be sacrificed to the greater public benefit derived from the undertaking.”(23) The court agreed that Parliament had, without qualification, authorized both the construction of the railroad parallel to the highway and the use of locomotives upon it. Although Parliament must have known that the railroad would inconvenience highway travellers, it had failed to impose any duty to screen the railway or to otherwise lessen its impacts. One could reasonably presume, therefore, that “the Legislature intended that the part of the public which should use the highway should sustain some inconvenience for the sake of the greater good to be obtained by other parts of the public in the more speedy travelling and conveyance of merchandise along the new railroad.”(24)

The courts confirmed the validity of the railroads’ defence of statutory authority in Vaughan v. The Taff Vale Railway, an 1860 case against a company whose sparking locomotive had set fire to a woods. The judges who heard that case agreed that they could not hold the company responsible for the fire. As one explained, “although the use of a locomotive engine must have been accounted a nuisance unless authorized by the legislature, yet, being so authorized, the use of it is lawful, and the defendants are not liable for an accident caused by such use without any negligence on their part.”(25)

Four years later Horatio and Mary Brand filed a now famous claim against the Hammersmith and City Railway Company, whose vibrating, noisy, smoky trains travelled the rails beside their property. The railroad’s vibrations reduced the value of their house and gardens and ensured that they would command a re-duced rent in the future. When the Brands requested compensation for their losses, the lower court ruled against them, explaining that Parliament, in expressly authorizing the use of locomotives, had overridden the common law and its protection of individuals’ property rights. The statutes that replaced the common law – the Lands and Railway Clauses Consolidation Acts of 1845 – did not stipulate that the companies must compensate for the effects of their operations. Requiring the railway company to compensate the Brands would therefore interfere with the power conferred upon it by the legislature.

One of the judges who heard the case explained that Parliament had acted in the public interest:

It would be almost impossible to construct a railway in the metropolitan district, or in any large town, without creating more or less inconvenience to a great number of persons; and it may be that the legislature may have thought that as to injuries resulting from the ordinary use and exercise of the powers conferred on railway companies to run locomotive engines, it was expedient to exempt railway companies from the multitudinous claims which might be made in respect of such injuries; and therefore the legislature may be supposed to have determined that private rights should yield to the public convenience.(26)

The judge then suggested that it was not merely expedient to protect the railway companies; it was also necessary, since inflicting upon them large penalties “might possibly prevent the increase of railways altogether.”(27)

The House of Lords upheld this decision after an unusually controversial hearing at which some law lords argued that the Brands deserved compensation and others insisted that compensation was inappropriate since the legislature had not provided for it.(28) Most agreed that in the absence of statutory authorization, the railway’s vibrations would have constituted a nuisance which neighbours could have enjoined. No longer could the Brands sue for nuisance, however.(29) As Mr. Justice Blackburn explained, “[I]f the Legislature authorizes the doing of an act (which if unauthorized would be a wrong and a cause of action) no action can be maintained for that act, on the plain ground that no Court can treat that as a wrong which the Legislature has authorized, and consequently the person who has sustained a loss by the doing of that act is without remedy, unless in so far as the Legislature has thought it proper to provide for compensation to him.”(30) Rex v. Pease, he said, had decided the matter back in 1832; Vaughan v. Taff Vale had followed. Huge sums had been invested in railways on the strength of those decisions. And so, regardless of those original decisions’ soundness, they ought now to be considered the law.

One law lord did point out the inequity of this reasoning. Mr. Baron Bramwell could not imagine that a company would be allowed to increase its profits by refusing to compensate the victims of its nuisances. Arguments about the necessity of creating nuisances, he protested, were really arguments about costs. For example, a railway company intent on preventing fires might station employees along its tracks to prevent sparks from igniting nearby grass. Since doing so would cost a considerable sum, the company would find it cheaper to simply risk starting fires. But there was no reason that the company – and ultimately the fare-paying passengers who benefited from the system – should not bear those risks and costs:

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.(31)

The law lord failed to persuade his colleagues or to modify the well established thinking on the issue of statutory authority.

Brand v. Hammersmith was to be extensively cited over the years, including in a 1901 case brought against the Canadian Pacific Railway Company for a fire set by sparks from one of its locomotives. In that case, CPR acknowledged that under common law it would have been liable for damages caused by fires that its trains started. It argued, however, that in authorizing the use of locomotives, Parliament had also authorized the use of fire and the occasional accidental escape of sparks. It claimed that Parliament had, in other words, indemnified railroad companies against the anticipated and inevitable results of using locomotives. The Privy Council agreed. “[I]t would be a repugnant and absurd piece of legislation,” the Lord Chancellor suggested, echoing Brand v. Hammersmith, “to authorize by statute a thing to be done, and at the same time leave it to be restrained by injunction from doing the very thing which the Legislature has expressly permitted to be done.”(32)

Statutes authorizing nuisances now abound. Their forms are legion. Sometimes they are quite frank. Like the KVP Act discussed earlier, laws may shield a single polluter. Or, like the Public Health Act, they may expressly confer statutory authority on a whole class of polluters – in that case, those who operate sewage treatment plants. Entire industries may also be protected by liability limitations, such as those conferred by the Nuclear Liability Act or the Canadian Shipping Act, which limits risk through the Maritime Pollution Claims Fund.(33)

Some statutes substitute damage awards for injunctions against polluters. The KVP Act, it will be recalled, overruled the Supreme Court’s injunction against a polluting pulp mill; the law decreed that downstream victims would have to be content with damage awards. Almost three decades earlier, the Ontario government had passed The Damage by Fumes Arbitration Act forbidding courts to hear cases about sulphur fumes. Instead, a government-appointed arbitrator would award damages; in no circumstances would the arbitrator issue injunctions.(34)

Ontario’s Mining Act similarly deprived victims of their common law rights to enjoin polluters. The court noted the loss in a 1962 case in which northern Ontario cottage owners protested a uranium mine’s contamination of their lake.(35) The judge who heard the case acknowledged that under the common law, the cottagers would have been entitled to water unaltered in character or quality, and furthermore, that a violation of their property rights would, traditionally, have entitled them to an injunction. The situation at hand, however, was governed not by common law but by the Mining Act, which conferred the right to discharge tailings and other waste and denied pollution victims an injunction; it merely provided for compensation for damages. As the judge noted, “[T]he effect of the statute is to terminate the common law right whereby the owner can secure protection of his property.”(36) New Brunswick’s Judicature Act achieves the same end by different means: it prohibits anyone harmed by the discharge from a manufacturing or industrial plant from seeking an injunction against it without permission from the Minister of Justice.

Then there are the myriad regulations and standards that sanction industrial discharges that would under common law be considered nuisances. The Ontario Water Resources Act grants statutory authority to those discharging effluent sanctioned by a Ministry of Environment certificate of approval.(37) One would be hard pressed to find in such certificates water quality standards that are as stringent as those imposed under riparian law, which traditionally allowed no alteration of water quality.

Regulatory protection is, of course, not limited to polluters of water. Regulations govern air emissions, odours, and noise levels. Control orders issued under Ontario’s Environmental Protection Act regulations are known in the field as “pollution mandates.” Ontario’s Farm Practices Protection Act exempts farmers from liability for odour, noise, and dust, provided they do not violate specified laws. Thanks to the act, an Ontarian can no longer go to court to request an injunction against a neighbouring farmer whose operations would, in the absence of the act, constitute a nuisance.(38)

In case after case, government regulations have made it easier – and cheaper – for industries to pollute. Polluters have long understood that they benefit from regulation. As one industry advisor noted, “No industry offered the opportunity to be regulated should decline it. Few industries have done so.”(39)The legislative erosion of traditional common law property rights has provided enormous subsidies to polluting industries. Manufacturers have been allowed to use others’ property for free, or at greatly reduced costs. The costs, of course, have not disappeared simply because polluters have not had to bear them. Instead, they have been externalized: the victims of pollution have been forced to underwrite the activities that harm them. This redistribution of costs is in effect a redistribution of wealth, typically from individuals to industry.(40)

While the erosion of property rights may have helped some industries to thrive, those industries have often been unviable, harming the economy as a whole as well as the environment. And they have often survived at the expense of more promising industries which have failed to secure special regulatory treatment. Furthermore, in relieving polluters from responsibility for the consequences of their actions, governments have removed a strong incentive for environmentally responsible behaviour. Under a common law liability regime, it is in an industry’s own financial interest to avoid harming others. Otherwise, it may face injunctions or large damage awards. Experience in diverse fields confirms that strict liability increases incentives for responsible behaviour. Stricter product liability laws in the United States have led to the improved safety of many products. Similarly, increased medical malpractice premiums have prompted doctors to change their procedures.(41)

Conversely, immunizing people or industries from risk and responsibility decreases their level of care. After Quebec adopted a no-fault automobile insurance system in 1978, automobile fatalities rose; Australia’s no-fault scheme similarly increased fatalities. Likewise, industries that, thanks to government regulation, do not bear the costs of environmental destruction are unlikely to invest adequately in systems that preserve clean air, land, and water.(42)

The public seems blissfully unaware of the perverse results of much environmental regulation. Environmentalists habitually call for further government intervention to stop pollution. Nobel Prize-winning economist Ronald Coase explained that economists share that approach:

When they are prevented from sleeping at night by the roar of jet planes overhead (publicly authorized and perhaps publicly operated), are unable to think (or rest) in the day because of the noise and vibration from passing trains (publicly authorized and perhaps publicly operated), find it difficult to breathe because of the odour from a local sewage farm (publicly authorized and perhaps publicly operated) and are unable to escape because their driveways are blocked by a road obstruction (without any doubt, publicly devised), their nerves frayed and mental balance disturbed, they proceed to declaim about the disadvantages of private enterprise and the need for Government regulation.(43)

More than three decades later, those concerned about the environment continue to cling to the illusion that our land, air and water can only be saved by further government action. Far too few yet realize the extent to which regulations, designed to protect particular industries and promulgated in the name of the public good, are environmental culprits.

Notes

1. Lord Halsbury, the Lord Chancellor, in Canadian Pacific Ry. Co. v. Roy (1901), C.R. [12] A.C. 374 at 389 (P.C.).

2. In 1987 Energy Probe, the City of Toronto, and 11 prominent Canadians launched a constitutional challenge to the Nuclear Liability Act on the grounds that it both violated the Canadian Charter of Rights and Freedoms and exceeded the federal government’s jurisdiction. After a series of appeals by nuclear utilities failed to prevent the case from being tried, the trial began in October 1993; the following spring, the judge decided in favour of the government and the electric utilities. Appeals may leave the constitutionality of the act unresolved for several years. For more information see Energy Probe et al. v. The Attorney General of Canada et al. (1994), 17 O.R. (3d) 717 (Ont. Ct. Gen. Div).

3. Theresa McClenaghan, plaintiffs’ opening statement in Energy Probe et al. v. Attorney General of Canada.

4. Michael Trebilcock, testifying as an expert at Energy Probe et al. v. The Attorney General of Canada, October 14, 1993, Transcript Volume 3, 288.

5. Ibid., 286.

6. Rylands v. Fletcher (1865), L.R. 1 Ex. 265, aff’d (1868), L.R. 3 H.L. 330.

7. For a lengthy discussion of this issue see Trebilcock and Winter, The Impact of the Nuclear Liability Act on Safety Incentives in the Nuclear Power Industry.

8. Mr. R. J. Orange, Parliamentary Secretary to the Minister of Energy, Mines and Resources, Commons Debates, February 6, 1970, 3316.

9. Ibid., 3315.

10. Mr. Louis-Roland Comeau, ibid., 3316.

11. Mr. Mark Rose, ibid., 3318.

12. Ibid., 3319.

13. For an extensive discussion of this issue, see the Supreme Court decision in Tock et al. v. St. John’s Metropolitan Area Board (1989), 64 D.L.R. (4th) 620.

In her decision for the majority Madame Justice Bertha Wilson reviewed in great detail the case history of the defence of statutory authority (starting with the early railway cases) and stated the principles to be derived from them. She distinguished between the inevitable results of legislation that imposes a duty or confers a specific authority and the results of legislation that confers a discretionary authority. Only the former, she concluded, have been statutorily authorized.

Madame Justice Wilson noted disapprovingly that some recent cases have not followed these principles. “[T]he inevitable consequences doctrine is now being applied without regard to the type of statutory authority conferred on the public body,” she warned. “In my view,” she concluded, “to the extent that some of the more recent cases are inconsistent with the early principles, they should not be followed.”

The Tock decision has been followed in at least seven cases since, and has been considered in several others. For commentary on the extent to which the decision has narrowed the defence of statutory authority, see Harvey, “Riparian Rights,” 522, and Rankin, An Environmental Bill of Rights for Ontario, 30-1.

14. Tock et al. v. St. John’s Metropolitan Area Board, ibid. at 645-8.

15. Gimpel, The Medieval Machine, 93-9.

16. Horwitz, The Transformation of American Law 1780-1860, 47-51.

17. The Governor and Company of the British Cast Plate Manufacturers v. Meredith and Others (1792), 4 T.R. 794, 100 E.R. 1306 at 1307.

18. Britain and several of the United States chartered railroads in the late 1820s. Canada began construction of its first line in 1835 (“Railway,” Encyclopaedia Britannica).

19. The London and North-Western Railway Company v. Bradley (1851), 3 Mac. & G. 336, 42 E.R. 290.

20. Bellinger v. New York Central Railroad, 23 N.Y. 42 (1861).

21. Stockport, Timperley and Altringham Railway Company (1864), 33 L.J. 251 (Q.B.).

22. Robinson v. New Brunswick Railway Company (1884), 11 S.C.R. 688.

23. The King v. Edward Pease and Others (1832), 4 B. &. Ad. 30, 110 E.R. 366 at 370.

24. Ibid. at 371.

25. Vaughan v. The Taff Vale Railway Company (1860), 5 H. & N. 679, 157 E.R. 1351 at 1355 (Ex.).

26. Brand and Wife v. Hammersmith and City Railway Company (1865), 1 L.R. 130 at 143-4 (Q.B.).

27. Ibid. at 146.

Traditional wisdom has it that railroads were responsible for the development of entire nineteenth-century economies. Ironically, as the work of 1993 Nobel economist Robert Fogel demonstrates, American railroads were far more dispensable than previously thought. Had railroads failed because they were unable to assume their full costs, the country, developing alternative methods of transportation, would likely have experienced comparable economic growth. (See the New York Times, “A Talent for Rewriting History” and “Economic Scene”; and the Wall Street Journal, “Chicago Rules.”)

28. The Directors, &c., of the Hammersmith and City Railway Company v. G. H. Brand and Mary C. Louisa, his Wife (1869), L. R. 4 H.L. 171.

29. Mr. Baron Bramwell took exception to this argument. He insisted that the decisions in Rex v. Pease and Vaughan v. The Taff Vale Railway Company were wrong. If the legislature had intended to grant the power to create nuisances, he said, it would have explicitly said so. He concluded that the plaintiff’s right of action had not been taken away.

30. Ibid. at 196, italics added.

31. Ibid. at 191.

32. Canadian Pacific Ry. Co. v. Roy, op. cit. at 388.

33. Block, “Environmental Problems, Private Property Rights Solutions,” 291.

In a debate over the Nuclear Liability Act, MP Mark Rose noted the parallels between that act and the Canada Shipping Act. “When we were considering the Canada Shipping Act,” he explained, “a subclause covering unlimited liability for [oil] spills was taken out of the act on the grounds that no insurance company would cover all the damage caused by such a disaster” (Commons Debates, op. cit., 3319).

34. For information on the circumstances surrounding The Damage by Fumes Arbitration Act see Dewees and Halewood, “The Efficiency of the Common Law.”

A riparian’s legal challenge to sawmills that deposited their wastes in the Ottawa River prompted one of the earliest Canadian laws substituting damages for injunctions. In 1885, fearful that the lawsuit could shut down the polluting mills, the Ontario legislature passed An Act respecting Saw Mills on the Ottawa River. The act ordered judges to weigh the lumber trade’s economic importance against the plaintiff’s injury before granting an injunction. For more information see McLaren, “The Tribulations of Antoine Ratté.”

35. Re Faraday Uranium Mines Ltd. and Arrowsmith et al. (1962), 32 D.L.R. (2d) 704.

36. Ibid. at 718.

37. Campbell et al., “Water Management in Ontario,” 506, and Estrin and Swaigen, Environment on Trial, 406.

Legal commentators debate the degree to which the Ontario Water Resources Act replaces the common law. According to the Canadian Environmental Law Research Foundation, the common law has been “relegated to a very modest role in resolving disputes over competing water uses” (“An Overview of Canadian Law and Policy Governing Great Lakes Water Quantity Management,” 111).

In contrast, Lucas, Percy, McNeil and Macklem, and Campbell et al. assert that the act does not abolish riparian rights. The latter explain: “The grant of a permit does not remove any of the common law obligations of the permittee, but requires him in addition to conform to the stipulations of the permit. Thus, an ‘extraordinary’ user who obtains a permit is still subject to the riparian rights doctrine. . . . In effect, the permit represents an upper limit upon the rate of extraordinary water use so long as the withdrawal it authorizes is equal to or less than that which a court would consider ‘reasonable'” (op. cit., 483-4. Also see Lucas, Security of Title in Canadian Water Rights, 20; Percy, The Framework of Water Rights Legislation in Canada, 76-7; and McNeil and Macklem, Aboriginal, Treaty and Riparian Rights in the Moose River Basin, 3).

Percy notes, however, that in a riparian challenge, “a court might consider the terms of the permit in assessing the reasonableness of the holder’s use” (The Framework of Water Rights Legislation in Canada, 87).

38. Estrin and Swaigen, op. cit., 13.

39. Owen and Braeutigam, The Regulation Game, 2.

40. Horwitz, op. cit., 70, 100-1; Ellickson, “Alternatives to Zoning,” 694-9; and Block, “Economists and Environmentalists,” 17.

41. Trebilcock and Winter, op. cit., 11.

For more on the deterrent value of liability, see Wright and Linden, Canadian Tort Law, Chapter 1; and Bardach and Kagan, Going By the Book, 271-83.

The experience of Florida’s fertilizer industry illustrates how differently polluters will behave when the costs of their pollution are “internalized.” In the 1950s, a number of phosphate fertilizer companies polluted the air with fluorides, which settled onto neighbouring grasslands, where cattle grazed. Many cattle developed fluorosis; their joints stiffened, rendering them so completely immobilized that they starved to death. Faced with the options of reducing fluoride emissions or purchasing polluted lands (so their emissions would hurt only themselves), the companies chose the latter. In order to avoid spending $16 million installing pollution-control equipment, they spent $25 million buying 200,000 polluted acres. Only then did they realize that to protect revenues from their new grazing lands, it made financial sense to install the pollution-control equipment (Crocker and Rogers, Environmental Economics, 93-112).

42. Trebilcock and Winter, op. cit., 10, 22.

43. Coase, “The Problem of Social Cost,” 26.

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2 thoughts on “Chapter 6: The Defence of Statutory Authority

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