One of the most wrenching questions in environmental law is who should pay for historic contamination which was legal at the time. There is no moral difficulty in holding today's polluters responsible for the consequence of their acts. But historic contamination, the unintended result of perfectly lawful conduct, is different. Inco has been ordered to pay $36 million in damages for lost property value, after 2000, due to nickel emissions before 1984 that were legal at the time: Smith v. Inco 2010 ONSC 3790
Is this just?
The rule of law is an essential part of the fundamental bargain that allows societies to live together. One key element of the rule of law, as explained by influential political theorist Joseph Raz, is that laws should be prospective, rather than retroactive:
[T]he literal sense of the rule of law”… has two aspects: (1) that people should be ruled by the law and obey it, and (2) that the law should be such that people will be able to be guided by it… The law must be capable of being obeyed… If the law is to be obeyed, it must be capable of guiding the behavior of its subjects. It must be such that they can find out what it is, and act on it….
All laws should be prospective, open and clear. One cannot be guided by a retroactive law.….
Observance of the rule of law is necessary if the law is to respect human dignity. Respecting human dignity entails treating humans as persons capable of planning and plotting their future.…
The violation of the rule of law… when the appearance of stability and certainty which encourages people to rely and plan on the basis of the existing law is shattered by retroactive lawmaking… Often it is analogous to entrapment: one is encouraged innocently to rely on the law and then that assurance is withdrawn and one’s very reliance is turned into a cause of harm to one. . .
There can be good reasons for retroactive laws. For example, in R. v. Finta  1 S.C.R. 1138, the Supreme Court of Canada upheld sections of the criminal code that retroactively prohibited war crimes and crimes against humanity. Finta, a lawyer and captain in the Royal Hungarian Gendarmerie, carried out the Nazi order to go confine, rob and deport to concentration camps 8,617 Hungarian Jews. He did so in accordance with a decree of the Hungarian Ministry of the Interior. Expert opinion at trial was that this decree was manifestly illegal, and that a person trained in Hungarian law must have known so at the time.
According to the Supreme Court, the rule against retroactive law is a key principle of justice. Nevertheless, it was just to retroactively prohibit crimes against humanity:
Since the internationally illegal acts for which individual criminal responsibility has been established were also morally the most objectionable and the persons who committed them were certainly aware of their immoral character, the retroactivity of the law applied to them cannot be considered as incompatible with justice. Justice required the punishment of those committing such acts in spite of the fact that under positive law they were not punishable at the time they were performed.
But how far should we extend this, in the absence of moral fault? Seven years ago, our Supreme Court allowed governments to issue retroactive cleanup orders to past polluters. Imperial Oil v. Quebec 2003 SCC 58 involved a petroleum depot that operated lawfully from 1920 to 1973. Imperial Oil sold the depot, as is, in 1979. The purchaser demolished the buildings, and resold the land to a developer at a nice profit. The developer twice cleaned up the land to the satisfaction of the Quebec Ministry of Environment and Wildlife, obtained a provincial certificate of authorization and a building permit, and then built a subdivision. Imperial Oil was not involved in this process, or notified of it.
In 1994, homeowners found hydrocarbons in the soil exceeding new residential standards. They sued the developer for building the subdivision and the City for issuing the building permit; the Ministry was added as a third party for approving the original cleanup. The matter became political.
To resolve its own political and legal problems, the Ministry ordered Imperial to prepare a cleanup plan. Imperial considered this unfair, and appealed. Among other things, the construction of the subdivision had made a cleanup much more expensive. The Supreme Court of Canada rejected their appeal, ruling:
- Polluters owe a debt to future generations
- Retroactive ‘polluter pay’ is fine, and
- Cleanup orders don’t have to be fair
However, a different analysis should apply to historic contamination in the context of civil remedies, the enduring common law struggle to reconcile competing interests and principles. Administrative orders are:
- issued by regulators
- in the name of the public interest
- on the basis of clear statutory authority.
In contrast, civil suits, including class actions, generally:
- seek financial benefits
- for individuals
- without clear authority.
But in Smith v. Inco, Justice Henderson of the Ontario Superior Court again chose retroactive liability, sweeping aside any meaningful limitation period for historic contamination. He found Inco liable of committing private nuisance and Rylands v. Fletcher, sixteen years after the plant closed.
Why didn't the limitation period protect Inco from the Port Colborne class action, Smith v. Inco (formerly Pearson v. Inco)? According to Justice Henderson, because of the discoverability principle. Everyone knew about the nickel refinery, and could easily have known that there was nickel in the soil in town. But most didn't know it would affect the value of their properties. In fact, the nickel may not have affected property values.
But then there was a chain reaction, none of which was caused by Inco. The MOE did a study of the effect of nickel on plants. In Sept 2000, they published it. To protect themselves, real estate agents started to disclose nickel in local real estate transactions. And, according to Justice Henderson, that started the limitation period for loss in property value from running all over again.
If that's all it takes, the same chain reaction could happen in many other places. There is TCE in Barrie and Cambridge, PAHs and many other things in Toronto and nickel in Sudbury. Petroleum hydrocarbons have been spilled almost everywhere. Land near busy roads has lead and salt. Agricultural land may have pesticides. No one can count any longer on the limitation period having run for any of it.