Page 13 - CCCA Magazine Spring 2014

{ ENVIRONMENTAL LAW } CONTAMINATED SITES: PERSONAL LIABILITY FOR DIRECTORS AND OFFICERS REGARDLESS OF FAULT By Dianne Saxe Environmental laws across Canada impose signifcant duties on subsidiary owned a contaminated site in corporations, and their directors and offcers (D&O). While most Cambridge, Ontario. The MOE eventu- ally admitted that none of those D&O of these environmental liabilities may be managed through due had caused the contamination. Most of diligence, unfortunately, not all of them can. the contamination probably occurred be- fore Northstar Canada even bought the site in 1985, some of it came from another property, and none of it happened while nvironmental regulators enforce en- owned, managed or controlled a contami- our client, Neil Baker, was on the parent vironmental laws in two main ways: nated site. And they assert that corporate company’s board. Eprosecution and administrative orders. D&O personally “manage and control” The primary basis for the order was D&O can only be convicted of corporate corporate assets, including assets owned s. 18 of the Environmental Protection environmental offences if the Crown can by subsidiaries. The result? The threat of Act, which authorized the MOE to issue prove, beyond a reasonable doubt, that personal clean-up orders to a broad range “preventive” orders, regardless of fault, to they personally committed each offence, or of past and present D&O, regardless of anyone who had ever owned, managed or at least knew it was happening, within their fault. There is no fnancial ceiling on such controlled the property. (S. 18 is not lim- control, and did nothing. Merely being liability and it never expires, no matter ited to insolvencies, but both Northstar part of the management of a company that how long ago a director retired. It does companies were insolvent.) Earlier deci- commits environmental offences is not it- not matter whether the contamination sions had created a rebuttable presump- self an offence. In addition, those charged originated on that site or migrated there tion that corporate directors have “con- with an environmental offence are almost or elsewhere. And due diligence is no de- trol” of property their corporation owned always entitled to a due diligence defence, fence, though one may be able to prove or rented. (In those cases, the directors per the Supreme Court of Canada in lack of “control.” had been negligent directing minds of R. v. Sault Ste. Marie. The extraordinary breadth of such li- closely held companies, who held offce Unfortunately, the same is not true for ability is illustrated by the unprecedented when contamination occurred.) administrative orders, such as clean-up $40M clean-up order to the former D&O The D&O appealed the Order. They orders issued in relation to contaminated of Northstar Aerospace: Baker v. Director had a strong case, but faced a crushing sites. In theory, environmental regulators (Ministry of the Environment). Northstar’s fnancial squeeze. Because the order was look to “polluters” to pay for contami- nated sites. In practice, many of the sites were contaminated many years ago by what was then legal and customary man- Te Ontario Ministry of the Environment agement of solvents, petroleum products, “ metals and similar industrial materials, claims the right to impose clean-up liability CANADIAN CORPORATE COUNSEL ASSOCIATION | CCCA-ACCJE.ORG ” 13 and the “polluters” are long gone. on anyone who ever owned, managed or The Ontario Ministry of the Environ- ment (MOE) claims the right to impose controlled a contaminated site. clean-up liability on anyone who ever