Innocent Owner Clean-up Liability

April 2015

The Environmental Protection Act provides that the MOE may require that “any person who owns or has the management or control of an undertaking or property” prevent the discharge of a contaminant from the property or eliminate adverse affects on the natural environment which may have resulted. Where a contaminant flows from one property onto neighbouring lands, can the innocent neighbour be required to assume primary responsibility for the clean up of their property?

In a recent decision of the Ontario Divisional Court, the court considered an appeal by a municipality from an order of the Environmental Review Tribunal dismissing the municipality’s appeal of an MOE order requiring the municipality to clean up furnace oil contamination on its property which had flowed from an adjoining property and had the potential to adversely affect an adjacent lake. The municipality argued that it was unfair for the MOE to require the municipality to be primarily responsible for the clean up when the contamination had not originated on its property and for which it had no responsibility.

The court summarized the factual background and issues on this appeal as follows:

“Several hundred litres of furnace oil leaked from the basement of privately owned property located in the [municipality]. The oil seeped onto property that the City owned and from there had the potential to adversely affect [the adjacent lake]. The Ministry of the Environment (the ‘MOE’) ordered the private property owners to remediate the damage. The owners, who had limited financial resources, made an insurance claim, but their insurance funds ran out before remediation could be completed on the City property. The MOE then ordered the City to clean up the contamination on its property and to prevent discharge of the contaminant from its property …

The appeal centres on the question of what are the appropriate considerations in making a clean-up order under the Act, against an owner of contaminated land who had no responsibility whatsoever for the contamination.”

In considering the municipality’s appeal, the court referenced the MOE’s Compliance Policy and concluded:

“The Compliance Policy makes it clear that if there are two or more persons who can be named in an order …, it is not up to the Provincial Officer issuing the order to apportion liability as amongst the various orderees. Each orderee is generally considered to be jointly and severally liable under the order and it is to be left to the parties to sort out the apportionment of liability amongst themselves.

The Compliance Policy also contains a specific provision dealing with “victimized” or innocent owners. According to that provision, current owners, innocent or not, should be named in an order. If there are exceptional or unusual circumstances, the timing and the content of the work to be done by a victimized owner can be adjusted. As well, if no environmental purpose would be served by naming the owner in the order, they do not need to be named.”

In dismissing the municipality’s appeal, the court agreed with the earlier decision of the Tribunal with respect to application of the Compliance Policy:

“The Tribunal also considered the fact that the Compliance Policy does provide specific guidance where the statutory decision maker is considering making an order against an innocent or ‘victimized’ owner like the City. According to … the Compliance Policy, such an owner will not be relieved of liability …

Section 157.1 of the Act can be accurately described as an ‘owner pays’ mechanism. It makes no reference to fault. It gives the provincial officer the discretion to make an order against an owner if the officer reasonably believes that such an order is necessary or advisable to protect the environment, which is the sole purpose of the Act.”

While earlier decisions of both the tribunal and courts had considered the issue of “fairness” relevant to the clean-up liability of innocent owners, with implementation of the MOE’s Compliance Policy, it is now clear that, where contamination flows to an adjoining property, the innocent neighbour may be required by the Ministry to clean up their property without regard to eventual apportionment of liability and cost recovery.