Serving ‘Rough Justice’: Assessing Remediation Costs And Liability Allocation Pursuant To The British Columbia Environmental Management Act

Written by Menka Sull and Samuel Kim, Alexander Holburn Law Firm

The British Columbia Environmental Management Act, S.B.C. 2003, c. 53, and the Contaminated Sites Regulation, B.C. Reg. 375(96) (CSR), provide the framework for identifying, remediating, and determining responsibility for the remediation of contaminated sites in British Columbia.

There has been relatively little case law considering the EMA; however, a recent BC Supreme Court decision provides an instructive analysis of cost recovery actions. In doing so, Jansen Industries 2010 Ltd. v. Victory Motors (Abbotsford) Ltd., 2019 BCSC 1621 shed light on two key issues: (1) What costs are recoverable as part of remediation costs under the EMA, and (2) How will liability for the remediation be allocated among those considered to be “responsible persons” for contamination?

Factual Background

Between 2009 and 2010, two properties located in Abbotsford – the Jansen site and the Victory Motors site – were discovered to have been contaminated by leaking underground gasoline storage tanks (“USTs”). The contamination originated from the Victory Motors site which was used as a gas station from World War II to 1994.

Example of the leaking underground storage tank

Jansen Industries 2010 Ltd. (“Jansen”) and Victory Motors (Abbotsford) Inc. (“Victory Motors”), the respective owners of the two sites, each brought actions against Actton Super-Save Gas Stations Ltd. (“Super-Save”), which operated the gas station from 1982 to 1992. Chevron Canada Limited (“Chevron”) and Shell Canada Limited (“Shell”) were also previous operators on the site; however, they were released from the action before trial as they settled with the plaintiffs.

Before trial, plaintiffs carried out the required remediation to obtain certificates of compliance for the respective sites pursuant to section 53(3) of the EMA. It was agreed that Jansen was not a responsible party, so the main issues pertained to the scope of the recoverable remediation costs, and allocation of liability amongst the other entities, including Victory Motors, Super-Save, Chevron, and Shell.

Recoverable Remediation Costs

The parties agreed that the amount of $395,706 paid to an engineering consulting company to obtain certificates of compliance for the two sites were properly remediation costs.

In his reasons for judgment, Mr. Justice Sewell held a number of remediation costs claimed by the plaintiffs were not recoverable pursuant to the EMA given the facts of this case, including:

  1. Legal fees incurred in seeking contribution from other responsible parties;
  2. Loss of rental income with respect to a building on the Victory Motors site while remediation was undertaken; and
  3. Costs to defend an action for remediation of contaminants originating on the Victory Motors site.

Although these remediation costs were recoverable in principle, Justice Sewell held that the plaintiff failed to tender adequate evidence regarding these claims.

Stigma Damages

The plaintiffs also sought stigma damages against Super-Save on the basis that residual contamination decreased the value of the sites. Super-Save argued, and the Court agreed, that stigma damages cannot be recovered as remediation costs under the EMA. Only the cost of bringing a site into compliance with the requirements of the EMA were held to be recoverable in a cost recovery action, which, in this case, was the cost of obtaining the certificates of compliance for the sites. Any claim exceeding this cost would have to be recovered in tort, after showing that a property owner was precluded from making optimal use of that property.

Allocation of Fault

Justice Sewell then turned to allocating liability amongst Victory Motors, Super-Save, Chevron, and Shell, having regard to the factors set out in section 35(2) of the CSR.

Price Paid for the Property

Justice Sewell considered the proposition that a party should not be able to recover the full costs of remediation if the remediation increased the value of the property by an amount in excess of those costs.

Here, the facts were complicated. The current owners of Victory Motors struck a bargain when they bought out all of its shares from the previous owner in 2012. The building on the Victory Motors site was then renovated and leased out to high quality tenants. The Court declined to treat the purchase price of the shares as a de facto purchase price of the property. Therefore, the profits realized from purchase of the Victory Motors shares did not form a basis to modify the allocation of remediation costs.

Due Diligence, Amount of Contaminants, and Relative Degree of Involvement

There was little evidence before Justice Sewell that any of the responsible persons exercised due diligence on the sites. Super-Save’s ten-year operation did not have an adequate inspection regime to detect small leaks, which were found to be enough to place significant amounts of contaminants in the soil over time. Meanwhile, from 1994 to 2012, Victory Motors did not exercise any due diligence at all, despite knowing that the gasoline infrastructure had remained in place. As Chevron and Shell were no longer parties to the action, no evidence was tendered regarding their exercise of due diligence.

The Court also considered the relative periods of operation, the volumes and toxicity of gasoline sold, and the installation and use of USTs by each of the responsible parties.

Remedial Measures Implemented and Paid for by any Responsible Party

The only remedial measures were the costs to obtain the certificate of compliance, which involved decommissioning the infrastructure and pumping out the remaining USTs.

Any Other Factor Relevant to a Fair and Just Allocation

Here, Justice Sewell took into account the circumstances under which ownership of Victory Motors changed hands in 2012. As Victory Motors received the benefit of remediation costs while being a significant contributor to the contamination, a significant portion of the remediation costs was allocated to it. The Court held that Victory Motors ought to have known about the environmental consequences of allowing disused gasoline infrastructure to remain on the property for nearly two decades.

The lengthy period of time that had passed since the likes of Chevron and Shell operated on the site militated toward a lower allocation of responsibility relative to the parties of the litigation. However, the allocation of liability reflected that a Chevron-installed UST was only decommissioned in 2012.

In the end, responsibility for the majority of the remediation costs was shouldered by Victory Motors and Super-Save.

Takeaways

This decision is important for a number of reasons.

First, it highlights the importance of establishing a sufficient evidentiary basis for claiming remediation costs under the EMA. The costs sought by the plaintiffs were denied not because the categories of costs were inherently unrecoverable as remediation costs, but because the evidence did not adequately support the claims.

The decision also clearly identifies remediation costs under the EMA and stigma damages as occupying distinct territories, with differing rationales and legal tests.

Finally, this decision highlights the practical difficulties in litigating over the relative contributions to a site’s contamination over several decades. The courts may only be able to administer “rough justice”, with all the uncertainty it entails.

This article has been republished with the permission of the authors.  It was first published on Alexander Holburn’s website.


About the Authors

Menka Sull is a member of the firm’s Construction + Engineering, Insurance, Administrative Law and Environmental Practices. Her practice is litigation-focused and includes a variety of areas of law including contractual disputes, construction litigation, environmental contamination, occupiers’ liability claims and professional negligence and disciplinary matters. Within her professional liability practice, Menka specializes in representing the interests of engineers, architects and lawyers in litigation arising out of professional activities.

Samual Kim is a student at the firm.  He has a B.Sc. from the University of the Toronto and a Juris Doctor degree from the University of Victoria.