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A legal analysis of the case Inco v. Smith, focusing on the application of the strict liability rule under Rylands v Fletcher. the court's interpretation of ordinary use of land, material physical damage, and the role of foreseeability in the rule. Inco is found not liable under the rule due to the ordinary use of its refinery and the absence of foreseeability of the damages.
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S.E.M.C.C. File Number: 03-09- IN THE SUPREME ENVIRONMENTAL MOOT COURT OF CANADA (ON APPEAL FROM THE ONTARIO COURT OF APPEAL)
B E T W E E N:
ELLEN SMITH APPELLANT (Appellant)
INCO LTD. RESPONDENT (Respondent)
Pursuant to Rule 12 of the Willms & Shier Environmental Law Moot Official Competition Rules 2013
ii
C. Secondary Materials.......................................................................................................... 20
A. Overview of the Respondent’s Position
1 The main issue in this case is whether the respondent is liable for the mere addition of a substance to a property without causing material harm. The respondent, Inco Ltd. (“ Inco ”), ran a nickel refinery in Port Colborne from 1918 until 1984, employing up to 2000 people at the height of its operations. Despite meeting or exceeding all applicable regulations, nickel particles accumulated in the surrounding properties over 66 years of the refinery’s operation.
2 The Ministry of the Environment (“MOE”) conducted several well-publicized studies of the area. After some properties were found to have elevated nickel concentrations, the MOE recommended remediation to a level well below one where potential health effects could arise. Inco voluntarily remediated 24 of the 25 properties. Ms. Ellen Smith (“ appellant ”) did not consent to remediation. Despite the remediations, substantial media coverage of the matter caused public concern.
3 The central dispute in this case is whether Inco is liable for a diminution in property values as a result of concern over regulated emissions from decades prior. The appellant, a group of local residents represented by Ms. Smith, argues that public concern over elevated concentrations of nickel in the soil caused their property values to decline. Inco submits that no existing legal principle can support liability absent either a wrongdoing or a material harm.
4 The trial judge found for the appellant under both nuisance and strict liability. The Court of Appeal reversed this decision, dismissing the nuisance claim on the basis that material physical injury did not occur. The Court of Appeal correctly applied a narrow interpretation of strict liability under Rylands v Fletcher to determine that Inco made ordinary use of the land.
5 Inco respectfully submits that public concern does not on its own support an action in nuisance. Additionally, the test for liability under Rylands v Fletcher is narrow and cannot apply where substances that are not dangerous are intentionally released. Allowing the plaintiff to recover for harm that has not occurred is inconsistent with tort law principles and would unduly expand the scope of nuisance liability. The need for certainty within the law militates against introducing new causes of action other than through the legislature.
Inco 2011 , supra para 7 at para 27.
(i) Physical Damage Must be Material, Actual and Readily Ascertainable
10 To be compensable under a claim for material physical damage, harm to a plaintiff’s land must: (a) be more than trivial, (b) have already occurred and (c) be measurable. A principal rationale of tort law is to provide compensation for an observable wrong which has taken place. The Court of Appeal held that damage amounting to a material injury must be “material, actual and readily ascertainable.” Phrased similarly by the court in McKinnon Industries v Walker , the damage must be “sensible, visible and material.”
Inco 2011 , supra para 7 at para 49. McKinnon Industries v Walker , [1951] 3 DLR 577, WN 401 (PC).
(ii) The Requirement of Actual Damage Has Not Been Met
11 Theoretical and potential risk does not equate to actual physical damage. As established in Walker and upheld by the Court of Appeal in the present case, the damage complained of must be ‘actual’ in the sense of having already occurred. This approach is supported by general legal principles. Tort law is intended to provide compensation for past actions which caused the plaintiff harm. Compensation under material physical damage cannot be provided for potential future harm in the absence of any known physical damage to the appellant’s property.
Inco 2011 , supra para 7 Philip Osborne, The Law of Torts , 3rd ed (Toronto: Irwin Law, 2007), at 362. [ Osborne ]
12 Actual damage to the appellant’s land has not occurred. Altered chemical composition of the soil does not equate to detrimental effect on the land. The appellant asserts that “mere chemical alteration of the content of soil can amount to physical harm or damage to property.” Inco submits that a mere alteration cannot be considered material physical damage, absent an actual negative effect. Additionally, the “risks” mentioned by the appellant are possibilities of future harm; no actual harm has occurred. The appellant translates these risks into an assumption that “irreparable damage” to the soil has occurred. This is not an appropriate legal standard.
Appellant’s Factum, supra para 6 at paras 33-34. Inco 2011 , supra para 7 at para 57.
(iii) A Loss in Property Value Does Not in Itself Indicate Actual Damage to the Land 13 The Court of Appeal correctly engaged in a two-stage analysis of material damage to land. The appellant must show: (a) an actual, physical and ascertainable damage to the land, and (b) a corresponding economic loss in property value. The appellant bases a substantial portion of their argument on the loss in property value due to public concern over the effects of nickel exposure. Yet as the Court of Appeal correctly pointed out, physical injury to the land itself has not been established.
Inco 2011 , supra para 7 at para 56.
14 The trial judge erred in adopting a circular causation argument, bypassing the requirement of actual physical damage within a claim for material physical damage. According to Justice Henderson, “if nickel has accumulated on the class members’ properties in such amounts so as to negatively affect the values of the properties, then the physical damage to the properties is material.” The Court of Appeal correctly asked whether the elevated nickel concentrations caused physical harm to the land. Since this was not established, the property value diminution was not compensable. Smith v Inco Ltd, 2010 ONSC 3970, 52 CELR (3d) 74, rev’d 2011 ONCA 628 at paras 87-88 [ Inco 2010 ]. Inco 2011 , supra para 7 at para 56.
15 The Court of Appeal’s line of reasoning is consistent with the approach taken in Shuttleworth , which dealt with a loss in property value through concerns of a possible spread of infection from the construction of a nearby hospital. The court in Shuttleworth stated that the plaintiff must prove “not only widespread belief but that such belief…[is] well founded in fact.” A depreciation in property value was considered merely evidence of a fear, not actual damage. The court in Shuttleworth declined to compensate for a loss in property values caused by concern which had not “been occasioned by any legal wrong.” The court held that the act in question must have been both tortious and hurtful. The appellant in the present case has failed to demonstrate that actual damage to the land has in fact taken place, and should not recover for mere public concern.
Shuttleworth v Vancouver General Hospital , [1927] 2 DLR 573 (BCSC), 1 WWR 476 at paras 8-9. Inco 2011 , supra para 7 at para 67.
(ii) The Factual Record Cannot Support this Novel Claim Being Advanced at an Appellate Level
19 The trial judge did not make any findings on the health risks or effects of nickel. Inco is unable to properly address this claim given the lack of factual evidence on the record. If the Court were to make factual findings on this issue, it would distort the mandate of an appellate court to consider questions of law and not of fact. The only claim available to the appellant should be the properly pleaded one of material physical damage to property. Appellant’s Factum, supra para 6 at para 5. Inco 2010 , supra para 14 at para 12.
(iii) In the Alternative, if this Claim were Considered, External Factors Support the Respondent
20 The presence of elevated levels of a naturally occurring substance does not constitute a significant inconvenience to the appellant. The Court is required to consider the circumstances and utility of the respondent’s conduct within a claim for personal inconvenience. As noted by Osborne, Canadian courts have generally taken a “robust approach to the extent of give and take that is required, particularly in an urban environment.” As stated by Lord Westbury in St. Helen’s Smelting Co :
If a man lives in a town, of necessity he should submit himself to the consequences of his obligations of trade which may be carried on his immediate locality, which are actually necessary for trade and commerce…and for the benefit of the inhabitants of the town and of the public at large. As the major employer in the Port Colborne area for years, Inco’s actions provided a significant benefit to the town. Inco produced a valuable commodity while complying with all relevant environmental and governmental regulatory schemes.
Tock v St. John’s Metropolitan Area Board , [1989] 2 SCR 1181, 64 D.L.R. (4th) 620[ Tock ]. Osborne, supra para 11. St Helen's Smelting Co v Tipping , (1865) 11 HLC 642, [1865] UKHL J81 at para 108. Inco 2011 , supra para 7 at paras 6, 9.
C. Strict Liability under Rylands v Fletcher is Not Made Out
21 The Court of Appeal for Ontario properly concluded that Inco is not liable under the rule from Rylands v Fletcher. This rule imposes strict liability for damage when two conditions are
met: the defendant uses their land in a way that is “non-natural” and a dangerous substance escapes. If both are made out, the user will be liable regardless of negligence. In this test, the phrase “non-natural use” is a term of art meaning not ordinary or appropriate to the circumstances.
Rylands v Fletcher , (1866), LR 1 Ex 265, aff’d (1868), LR 3 HL 330 [ Rylands v Fletcher ]. Inco 2011 , supra para 7.
22 Since its inception, courts and commentators have sought to clarify the rule in Rylands v Fletcher by narrowing its application. Persistent concerns about the boundaries of the rule and its relation to nuisance and negligence have led to its repudiation in Australia ( Burnie ), and thorough narrowing in the United Kingdom ( Transco ). The rule has received relatively little treatment in Canadian appellate courts.
John Murphy, “The Merits of Rylands v Fletcher ” (2004) 24 Oxford JLS 643. Burnie Port Authority v General Jones Pty Ltd , (1994) 179 CLR 520 (Aust HC), [1994] HCA 13 [ Burnie ]. Transco plc v Stockport Metropolitan Borough Council , [2003] UKHL 61, [2003] 2 AC 1 [ Transco ]. Inco 2011 , supra para 7 at paras 68, 70, and 108.
23 In order to succeed on a claim under the rule in Rylands v Fletcher , a plaintiff must demonstrate the presence of two broad elements:
(a) a “non-natural” use of the land, meaning a use that is not ordinary ( Rickards ) or appropriate to the time, place and manner of that use ( Tock ); and (b) an escape of a substance likely to do mischief, meaning an unintentional release of something that is likely to be dangerous if it is escapes (Pun & Hall). Rylands v Fletcher , supra para 21. Rickards v Lothian , [1913] UKPC 1, [1913] AC 263 [ Rickards ]. Tock v St. John’s Metropolitan Area Board , [1989] 2 SCR 1181, 64 D.L.R. (4th) 620 per La Forest [ Tock ]. Gregory S Pun & Margaret I Hall, The Law of Nuisance in Canada (Toronto: LexisNexis, 2010) at 132, 137 [Pun & Hall]. Inco 2011 , supra para 7 at paras 71, 74, 112.
24 Neither of these two broad elements are made out in this case. Inco’s refinery was an ordinary use of the land, operating in and benefitting an industrial community for 66 years. It met
consequences ( Inco 2011 ). Non-natural use also considers the degree of dangerousness and the circumstances of the activity ( Inco 2011 ).
Inco 2011 , supra para 7 at paras 98 and 102.
28 In Gertsen v Metropolitan Toronto, the court considered the time, place, manner, and purpose of the land use in determining whether strict liability applied. The Court held it was inappropriate to use the land for a landfill because it was placed in close proximity to residences, and alternative locations were better suited for a landfill. The purpose of the use of that property for a landfill was self-serving and not grounded in logic. In the case at bar, Inco’s refinery was located for sound reasons in an industrial area of Port Colborne and near shipping lanes. The refinery and the town evolved and benefitted each other over decades. Unlike Gertsen , the character of the neighbourhood was different when this location was chosen.
Gertsen v Metropolitan Toronto (Municipality of) , [1973] 2 OR (2d) 1 (HCJ), 43 DLR (3d) 504 at 19- [ Gertsen ].
29 Inco’s use of the land is consistent with the definitions of ordinary use adopted in Tock and Gertsen , which considered the time, place, manner, and purpose of the use. Port Colborne is an industrial town. Inco was a well-established component of the community, contributing greatly to the economic and social fabric of Port Colborne. It was a major employer of up to 2,000 people. At the time most nickel particles were released, predominantly before 1960, the public was more accepting of such emissions. The refinery operated in total compliance with all applicable regulations. Finally, the fact that Inco operated for a private purpose does not diminish the community benefits that it generated, and is not dispositive.
Gertsen , supra para 28. Tock, supra para 23. 30 When land use involving seemingly dangerous substances becomes ordinary, and its risks are known and regulated, strict liability is no longer appropriate. Inco embraced standards set by the government and the local community, operating beyond compliance and in close conjunction with regulators. The Court of Appeal endorsed the importance of compliance in assessing a non- natural use. The use embodied by these facts does not amount to the dangerous and unusual use that strict liability under Rylands v. Fletcher aims to rein in.
Pun & Hall, supra 23 at 115.
Inco 2011 , supra para 7 at para 100.
(ii) Emission of Nickel Particles is Not an Escape of a Substance Likely to Cause Mischief
31 Even if this Court holds that the refinery constitutes a non-natural use, the emission of nickel particles is not an escape of a substance likely to cause mischief. Strict liability is not made out for two reasons. First, intentional emissions made in the ordinary course of business are beyond the ambit of the risk envisioned by the Rylands v Fletcher rule. Second, emissions are not likely to cause mischief because nickel is naturally occurring and not dangerous per se , and because it was emitted within all regulatory requirements.
32 Intentional emissions that are a direct result of everyday business operations are inconsistent with the type of risk Rylands v Fletcher addresses because they are not accidental. Strict liability under Rylands v Fletcher does not apply to all risks associated with an activity, only to situations where damage flows from mishaps and accidents. These cases have predominantly involved accidents such as floods ( Tock ), overflows ( Rickard ), and spills ( Cambridge ).
Tock , supra para 23. Rickards , supra para 23. Cambridge Water Co Ltd v Eastern Counties Leather plc, [1994] 2 AC 263 (PC), 1 All ER 53 [ Cambridge ].
33 The Court of Appeal rightly suggested the principle is restricted to mishaps or misadventures related to the defendant’s activity ( Inco 2011 ). The escape component of Rylands v Fletcher connotes something unintended, a theme picked up on by commentators (Klar) and courts ( Kert ). Emissions that are intentional, monitored, and within regulated levels are outside the ambit of the rule. They are best considered under other causes of action because associated liability is best determined through questions of duty and standard of care.
Inco 2011 , supra para 7 at paras 82 and 112-113. Lewis N. Klar, Tort Law, 5th ed (Toronto: Carswell, 2012), at p 653. North York (City) v Kert Chemical Industries Inc , [1985] OJ No 510, 33 CCLT 184 (HCJ). Pun & Hall, supra 23 at 132, 137.
perception from media coverage of preliminary government reports were not foreseeable to Inco during the refinery’s operation many decades earlier. Inco met or exceeded all applicable regulations. While the presence of a regulatory standard does not establish foreseeability of harm, it does provide guidance to the appropriate way to operate without harming the community. The Supreme Court indicated that regulatory compliance is one factor to consider in determining liability ( Saskatchewan Wheat Pool ).
Inco 2011 , supra para 7 at para 110. R v Saskatchewan Wheat Pool , [1983] 1 SCR 205, 143 D.L.R. (3d) 9 [ Saskatchewan Wheat Pool ].
(iv) Strict Liability under Rylands v Fletcher is Sufficient in its Current Form
38 This Court should not recognize an emerging strict liability cause of action for environmental claims. The Court of Appeal rightly found no convincing jurisprudential or policy reasons to read the rule broadly and impose strict liability for “ultra-hazardous” activities without adequate regard for non-natural use, mischief, or escape. This Court should not stretch strict liability beyond the established confines of Rylands v Fletcher to include all damages that result from an “ultra-hazardous” use for four reasons: (a) legislatures are better positioned to establish rules in this important policy area, (b) a broader rule would be so difficult to interpret as to create great uncertainty for those potentially affected, (c) the laws of negligence and nuisance have evolved to provide sufficient bases for recovery, and (d) it is inconsistent with the focus of the rule in Rylands v Fletcher on mishaps and accidents.
Inco 2011 , supra para 7 at para 78. Andrew Waite, “Deconstructing the Rule in Rylands v Fletcher ” (2006) 18 J Envtl L 423.
D. Novel Causes of Harm are Unnecessary and Inapplicable. 39 A sub-issue on this appeal is whether novel causes of action can help determine the case at bar. The inapplicability of the recovery regime of the Environmental Protection Act to the present case will be discussed. Four novel causes will be considered: breach of statutory duty, waiver of tort, the precautionary principle, and the polluter pays principle. None of these causes merit recognition by this Court. Even if these causes of action were worthy of adoption into Canadian jurisprudence, none would apply to the case at bar.
(i) The Environmental Protection Act Provides Immunity for pre-1988 Offences
40 The appellant submits that the specific compensation regime in the Environmental Protection Act ( EPA ) would assist their claim. However, the legislature specifically introduced a time limitation on pre-1988 offences in s. 195 of the EPA. All emissions in the case at bar occurred prior to 1984, and the majority of those emissions occurred prior to 1960. Applying any part of the EPA to the present case would defeat the clear intentions of Ontario’s legislature and upset public expectations. Such a result should be resisted by this Court.
Appellant’s Factum, supra para 6 at paras 54-57. Environmental Protection Act , R.S.O. 1990, c E-19, at s 195 [ EPA ] Inco 2011 , supra para 7 at para 7.
(ii) The Nickel Emissions Were Not a Compensable Spill Under the EPA
41 Even if the appellant’s claims are not statute barred by s. 195, s. 99 of the EPA only allows compensation for a spill of a pollutant. A spill is defined in s. 91 as “a discharge …that is abnormal in quality or quantity in light of all the circumstances of the discharge.” As argued in preceding sections, steady emissions from a smokestack in an industrial area are not abnormal. These emissions should not be classified as a spill under the EPA , and therefore should not be held compensable under s. 99.
EPA , supra para 40 at ss 91, 99.
(iii) Breach of Statutory Duty was Rejected by the SCC and Should Only be Reintroduced by the Legislature
42 The doctrine of “breach of statutory duty” allows a plaintiff to claim damages where a statute imposes upon the defendant a duty to do something, where that duty is imposed in order to protect persons such as the plaintiff, and where the defendant’s breach of that duty caused the plaintiff’s injuries. While the doctrine still exists in England, the Supreme Court of Canada has banished it in Saskatchewan Wheat Pool , holding that while a statutory duty can provide some evidence of the appropriate standard of care, it does not in itself ground a tort claim.
Donaghey v Boulton and Paul , [1968] AC 1 (HL), [1967] 2 All ER 1014. Saskatchewan Wheat Pool , supra para 37.
Appellant’s Factum, Team #1-2013, moot materials, at paras 55-74 [Appellant’s Factum #1].
46 Inco submits that there is considerable judicial recognition of the concepts of “efficient breach” and “efficient tort.” For example, in Evergreen Building Ltd. v IBI Leaseholds Ltd. The BC Court of Appeal used the concept of efficient breach to allow a departure from ordinary property law where such departure would create a better overall outcome. We submit that disgorgement remedies should operate only in a punitive function to punish flagrant wrongdoings. Good faith actions should not be the target of disgorgement doctrines.
Evergreen Building Ltd v IBI Leaseholds Ltd , 2005 BCCA 583, 50 BCLR (4th) 250.
(vi) Waiver of Tort is Inapplicable to a Case with no Wrongdoing
47 Even if the waiver of tort doctrine is adopted into Canadian law, the doctrine requires the defendant to have engaged in a wrongdoing which had the elements of a “tort absent harm”. As argued in the previous sections, there was no wrongdoing in the case at bar: Inco’s operations were a legitimate commercial enterprise that created 2000 jobs in the community. Inco’s actions did not result in material physical damage to the appellant’s land. Indeed, the appellant’s difficulty stems largely from their failure to identify any recognized wrongdoing that Inco could have been guilty of. Since waiver of tort is mainly a disgorgement doctrine, it should not be applied to a case where no wrongdoing can be shown.
(vii) The Precautionary Principle is Not Applicable to Nuisance Actions
48 Appellant’s Factum #1 claims that the precautionary principle should decide the present case. The precautionary principle is nothing more than an exhortation to take additional precautions where the risk of an activity is unclear. In its strongest form, it is an imperative to refrain from any activity whose consequences are the slightest bit uncertain. This is impractical in everyday operations.
Appellant’s Factum #1, supra para 45 at 80-81. Cass R Sunstein, “Beyond The Precautionary Principle”, U Chicago Law & Economics, Olin Working Paper No. 149 [ Sunstein ].
49 Inco respectfully submits that while the precautionary principle may offer guidance to legislators drafting environmental statutes, it is unhelpful in private nuisance actions. A nuisance action is concerned with actual material physical damage to the land; not with the amount of potential damage and the precautions that need to be taken against it. While the imperative to
take precautions could be relevant to a discussion of appropriate standard of care, it is irrelevant to a discussion of actual material physical damage. By proceeding in nuisance instead of negligence, the appellants have set aside debates about standards of care or the precautionary imperatives applicable to those standards.
50 Further, Inco respectfully submits that the complexity of most practical problems renders the precautionary principle unhelpful to a search for acceptable solutions. In the words of Cass Sunstein:
in [its] strong form, the precautionary principle … is literally paralyzing— forbidding inaction, stringent regulation, and everything in between. … [I]n the relevant cases, every step, including inaction, creates a risk to health, the environment, or both… [because any action] might well deprive society of significant … “opportunity benefits” of a process or activity.
Because of its irrelevance in assessing actual interference with a neighbour’s property, as well as its paralyzing nature in other discussions, we respectfully submit that the precautionary principle should not be a part of nuisance law in Canada. Sunstein , supra para 48.
(viii) Inco’s Actions Were Precautionary
51 Even if the precautionary principle is to apply, Inco’s actions were in accordance with such a principle. The voluntary upgrades to the refinery in 1960 and the voluntary closure of the refinery in 1984 were precautionary measures to limit emissions. Inco’s voluntary remediation of MOE-specified properties was another precaution aimed at avoiding even the most minute risks. It is unclear what additional precautions Inco could have taken short of ceasing all industrial operations. Since Inco’s activities provided Canada with significant stockpiles of building materials and saleable resources, it is not at all clear that the avoidance of those activities would have been of net benefit to Canada.
(ix) The Polluter Pays Principle is a Statutory Doctrine that is not Available in Ontario
52 Appellant’s Factum # 7 claims that the polluter pays principle should determine the present case. In support, they cite Imperial Oil Ltd. v Quebec (Minister of the Environment). However, that case was decided on the basis of Quebec’s Environmental Quality Act , which specifically allowed retroactive compensation of environmental contamination. The first paragraph of that case specifically calls polluter pays a “statutory principle.” While a statutory
