Dec '11/Jan '12

Millions in the balance

Vale class action case may go to Supreme Court

By G. Lanktree


A landmark environmental class action lawsuit brought by the residents of Port Colborne, Ontario, against Brazilian mining giant Vale S.A. may be headed to the Supreme Court of Canada, said the plaintiff’s lawyer, Eric K. Gillespie. In 2010, his clients had been awarded $36 million, but that was overturned by the Ontario Court of appeal in October 2011. In early December, Gillespie asked Canada’s top court for leave to appeal that decision.

“The Court of Appeal’s decision has raised a number of concerns for people in the legal profession,” Gillespie said. “They think it will have a significant effect in reducing people’s ability to bring environmental class actions.”

The case against Vale, known as Smith v. Inco Ltd., involves 7,000 people who have owned residential property in Port Colborne since 2000. They argue that property values have been impacted by contamination from the Inco nickel refinery that operated in their city between 1918 and 1984, and negative press in 2000 that followed broad public disclosure of the contamination. They sought compensation from Vale after it bought Inco in 2006.

As the case stands now, industrial companies can take comfort that a claim of nuisance would have to be substantial in order for the plaintiffs to be awarded damages. “In the case of Smith v. Inco Ltd., the simple fact that nickel emissions changed the chemical composition of the soil wasn’t enough,” said Steven F. Rosenhek, a partner in the legal firm Fasken Martineau DuMoulin LLP, who often handles class action cases.

“Many of the concerns that people have about environmental damage are not about physical damage or physical injury,” Rosenhek added. In making their case, the plaintiffs did not claim that nickel contamination had affected their health, nor the use of their properties. “If the Court of Appeal’s ruling stands, you can’t just say you have a concern; you actually have to show there was some kind of damage,” he explained. “It would eliminate a lot of complaints.”

After an application for leave to appeal is filed, it can be six to nine months before the Supreme Court reaches a decision on whether to hear the case. But Gillespie believes there’s a good argument for it to go through. “The court is going to be determining if there are matters or issues of national importance that go beyond the concerns of the individual parties,” he said. “The law around private nuisance that appeared to be well settled has now become uncertain. The Court of Appeal’s standard of having to prove significant health risks, if not actual harm, changes the law.”

The Court of Appeal’s decision to overturn the ruling hinged on the conclusion that the standard of strict liability, established in an 1868 English case, did not apply. The standard weighs whether a company is legally responsible for damage and loss resulting from its actions or omissions. In the English case, a landowner was found in the wrong after a water reservoir built over a neighbour’s mine flooded the pit.

But whereas the reservoir failed catastrophically, Inco’s refinery had impacts on its surroundings from normal use. The words from the original case considered the reservoir a “non-natural” use of the land because it brought quantities of water to the property that weren’t originally found there. “Yet the Court of Appeal appears to have focused on whether the use by Inco was a licensed or appropriate use,” said Gillespie. “This decision appears to have opened up a debate about how those original words should be correctly interpreted.” In the eyes of the Court of Appeal, the Inco facility was not a “non-natural” use of the property, as it complied with all the relevant environmental laws.

If the original trial judgment were restored in the Port Colborne case, the mining industry would have to worry about effects that did not amount to physical harm, said Rosenhek. “Parties could complain about their concerns about health rather than having to prove tangible health impacts or a realistic risk of such impacts,” he pointed out. As such, the case could have a wide impact on operations such as Alberta’s oil sands and other extraction or refining projects.

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