Inco-Vale decision overturned by Ontario's highest court

Published by MAC on 2011-10-18
Source: The Canadian Press, Financial Post, others

$36M award against Inco overturned

The Canadian Press

7 October 2011

Ontario's highest court has set aside a decision against mining company Inco Ltd. that awarded $36 million in damages to residents of Port Colborne, Ont.

In June 2010, an Ontario Superior Court justice made the award to about 7,000 Port Colborne households that claimed elevated levels of nickel had negatively affected the values of their properties.

Inco acknowledged that its Port Colborne refinery, which ceased nickel emissions in 1984, was the source of the vast majority of the elevated levels of nickel found in the area.

The class-action claim was for the decrease, or lack of increase, in the values of properties from September 2000.

In a decision released Friday, the Ontario Court of Appeal found the trial judge erred in a number of areas in reaching his decision. Among other issues, the Appeal Court ruled the claimants had failed to prove Inco's emissions constituted a nuisance as determined by the trial judge.

"Had the claimants shown that the nickel levels in the properties posed a risk to health, they would have established that those particles caused actual, substantial, physical damage to their properties," the appeal justices wrote. "However, the claims as advanced and as accepted by the trial judge were not predicated on any actual risk to health or well-being arising from the particles in the soil."

Limitation period

Inco, which was acquired by Brazilian mining company Vale SA in 2006, had argued at trial that the limitation period to make a claim had expired, but Judge J.R. Henderson ruled that the extent of contamination wasn't generally known until early 2000. The Appeal Court noted that this implied that some residents would have been aware earlier of the potential effect of the nickel.

"It is an error to treat the limitation period as running from the date when a majority, even an overwhelming majority, of the class members knew or ought to have known the material facts in issue," the appeal judges said.

The trial judge also found that Inco's operation between 1918 and 1984 of the nickel refinery in Port Colborne, a city located southwest of Niagara Falls on the north shore of Lake Erie, constituted a non-natural use of the property.

The Appeal Court said the evidence suggests that Inco operated in a heavily industrialized area in a manner that was ordinary and usual and did not create risks beyond those incidental to virtually any industrial operation.

"In our view, the claimants failed to establish that Inco's operation of its refinery was a non-natural use of its property," the justices wrote.

The Appeal Court also ruled that the claimants failed to prove damages and the $36 million award was based, in part, on flawed data.

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Court dismisses Inco lawsuit

By Christine Dobby

Financial Post 

8 October 2011 

The Ontario Court of Appeal has dismissed an environmental class-action lawsuit and reversed an award of $36-million to a group of Port Colborne residents who claim their property values took a hit because of emissions from a nearby Inco Ltd. refinery.

In a decision released Friday, a three-member panel of the court unanimously ruled that the plaintiffs did not prove that Inco was liable to them.

Even if they had succeeded on that front, the court said, the plaintiffs failed to show any actual loss to Port Colborne's property appreciation rates.

On top of throwing out the claims, the court ordered the plaintiffs to pay $100,000 in costs to Inco.

In one of the first class-action lawsuits to go to trial, Judge Joseph Henderson of the Ontario Superior Court of Justice on July 6, 2010, ordered Inco to pay three subgroups of plaintiffs a total of $36-million in damages.

Now owned by Vale Canada Ltd., Inco operated a nickel refinery in the small town on the north shore of Lake Erie from 1918 to 1984.

The Court of Appeal said Inco complied with contemporary environmental and regulatory rules, but emissions from the 500-foot smoke stack at the refinery led to a build-up of nickel particles in the soil in the surrounding area.

Although there was no suggestion of threat to human health, the issue began to attract public attention in 2000 when the Ministry of the Environment released the results of a phytotoxicology study, the court said in its decision.

This report on the effects of nickel levels on plant life identified "hot spots" where the levels were very high. The Ministry eventually ordered Inco to "remediate" 25 properties with particularly high levels, which involved removing the soil to a certain level and replacing it with new soil. This was completed by 2004, although Ellen Smith, the representative plaintiff, would not allow Inco to remediate her land.

The class of claimants included everyone who owned residential property in an area that covers most of Port Colborne, approximately 7,000 properties. They alleged that because of the public health concerns the nickel deposits provoked, their property values did not increase at the same rate as comparable values in other small cities nearby.

The Court of Appeal said the plaintiffs did not prove Inco was liable to them.

"People do not live in splendid isolation from one another. One person's lawful and reasonable use of his property may indirectly harm the property of another or interfere with that person's ability to fully use and enjoy his or her property," the court said.

It said the plaintiffs' nuisance claim failed because they could not show "actual, substantial physical damage" to their property that posed some risk to the residents' health or well-being.

Concern generated by fear of a public health risk was insufficient, the court said.

The court said the plaintiffs also failed to establish strict liability and even if they had, the evidence did not prove that property values were negatively affected.

The case was certified as a class action in February 2006 and worked its way through the court system to a threemonth trial that started in October 2009. The court heard Inco's appeal from the trial decision over four days in May.

Lawyers for both sides were not immediately available for comment, but David Sterns, a lawyer at Sotos LLP in Toronto, said he suspects the plaintiffs will likely seek leave to appeal to the Supreme Court of Canada.

"You always have to imagine the worst-case scenario when you take on a case and this comes pretty close to that," he said. "I take my hat off to the plaintiffs that they pushed the case as far as they did, and they'll probably push it further."

Mr. Sterns, who frequently represents plaintiffs in classaction cases, called Friday's ruling a "dramatic reversal" in "a marathon dispute between people in a community and a very large company."

"Everybody else follows in the path that these cases blaze," he said, noting that only a limited number of cases go all the way to trial.

James Sullivan, a litigation partner in Blake Cassels & Graydon LLP's Vancouver office, has represented defendants in numerous class-action lawsuits.

Reflecting on the decision, he said he believes many "speculative claims" being advanced as class actions will ultimately be dismissed.

"I suspect it will cause plaintiffs' counsel to reconsider the viability of environmental class actions," he said. "However, given the relatively low threshold for certification, I suspect we will continue to see them."

Mr. Sterns acknowledged that the court's ruling stands as a reminder of the downside risk of taking cases like this on as a lawyer or pursuing them as a plaintiff but said it wouldn't discourage them entirely.

"I think it will remind people they better have the commitment and resources when they start these cases, and be prepared to take them all the way," he said.

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Vale battle may go to Supreme Court

Well and Tribune (Canada)

13 October 2011

WELLAND - The class-action lawsuit against Vale is being taken to the highest court in the country.

Lawyer Kirk Baert from Toronto law firm Koskie Minsky LLP said he's taking the first steps to bring the case about contaminated soil and property values to the Supreme Court of Canada.

The Ontario Court of Appeals dismissed the class-action lawsuit against the mining company in its ruling on Friday, a lawsuit that otherwise would have awarded $36 million to more than 7,000 homeowners named in the lawsuit.

After discussing their options, Baert said lawyers working on the case chose to seek leave to appeal that decision with the Supreme Court of Canada.

But it's another lengthy process. It'll take about six months before a team of three Supreme Court judges even decide whether or not they will hear the appeal.

"They only hear cases that they think are of national importance," Baert said.

If the case proceeds, Baert estimated it will take 18 months before a final court decision is made.

In its decision to dismiss the case, the Ontario Court of Appeals referred to several errors made during the trial a year earlier. Baert, however, disagreed.

"I think the trial judge's decision was correct. I don't think he made any errors factual or legal," he said. "It's the court of appeal that may have made some errors both factually or legally. There are a number of statements in the decision which we don't agree with in terms of the factual background."

For instance, he said, the ruling called the area "heavily industrialized."

"I wouldn't call the Rodney St. area heavily industrialized. It's a residential area as is the rest of the affected group."

He said that mistake may have tainted the overall decision.

"Looking at something that's heavily industrialized is a very different matter than looking at something that's a residential community," he added. "It's a residential area with a plant next to it. It's not an industrial area with houses dropped into it."

Although the Ontario Court of Appeals decision also awarded $100,000 to Vale to cover legal costs, Baert said residents won't need to worry about that regardless of the outcome of continuing legal battle.

"It'll come out of the Law Foundation of Ontario's pocket, because in class actions in Ontario you can seek funding from the law foundation. In exchange for taking 10% of the proceeds if the case is successful, they agree to pay adverse cost awards made by the court if the case fails."

Learning that the legal battle is continuing was welcome news to residents who have been involved in the issue.

"It's so comforting," said Diana Wiggins, who has been involved in the community-based risk assessment process. "I haven't been able to talk to the lawyers yet, but I can't see them going ahead with it unless they believe there's good reason to."

While she's happy to see the case progressing, she's a little frustrated that it's not over yet.

"It's exciting, but it's also another year and a half and another drawn-out court process," she said. "I think this is the last step. This will be the final go because it's the Supreme Court."

In comparison to the decade-long legal battle behind them, she said another year and a half won't be that bad.

"But it's horrible that all these people have to sit there on pins and needles and wonder what's going on. It's their lives and it's just so disturbing," Wiggins said.