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Environmental and OHS Class Actions: Playing for "Keeps"

Submitted By Firm: McLennan Ross, LLP

Contact(s): Gerhard Seifner, Glenn D. Tait, Teresa R. Haykowsky

Author(s):

Stuart W. Chambers

Date Published: 4/16/2012

Article Type: Legal Article

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Many heavy industry companies operating in Canada require licences from environmental regulatory authorities where their operations may have an impact on the environment. They must also comply with federal, provincial and municipal environmental laws. Further, all companies have a general obligation to reasonably ensure the health and safety of their employees. When an environmental or OHS incident occurs, the company responsible may face charges or other penalties under “Health, Safety and Environment” legislation. However, their liability may not be confined to the regulatory arena – companies may face exposure to lawsuits claiming damages arising from these same activities. In fact, even if the activity in question was properly licenced, that would not automatically protect the company from civil judgments against it. And when the lawsuits are advanced as class actions, the costs of defending and the scope of damages awarded by the court may ultimately ruin the company. A class action is a hard fight, one often played for “keeps”.

The landscape of civil litigation in Canada was fundamentally altered by the introduction of
provincial class action legislation, commencing in B.C., Ontario and Quebec in the 1990s and now
encompassing almost every province and territory. Alberta’s legislation came into force in 2004.

A class action is in most respects the same as any other civil lawsuit. However, a critical distinction
is that upon Court approval or “certification”, the action proceeds on the instruction of an identified
representative Plaintiff (or several, in the case of sub-classes) on behalf of all members of the class.
Class members who do not opt out of the litigation (in most cases - some jurisdictions such as B.C.
provide for “opting in” by non-residents in order to be bound) are bound by the outcome of the
litigation. The principal rationales for class actions include the efficiency of combining numerous
proceedings into one action, the saving of scarce judicial resources by doing so, and an enhanced
ability to access justice on the part of individual litigants. Commencing separate actions would often
be uneconomic, in particular where the claims are, on an individual basis, small. However,
aggregated on behalf of a large class, claims can become a formidable threat to Defendants.

Although class actions are generally conceived in the context of product liability suits and, more
recently, securities issues, they may also have an impact in areas more traditionally addressed
through regulatory rather than civil litigation proceedings. For instance, environmental issues have
of late have become more prominent in the class proceedings arena.

A recent example is the 2011 decision of the Ontario Court of Appeal in Smith v. Inco Limited. In
this case, the class comprised all residents of the Ontario municipality of Port Colborne. The claims
related to damages alleged to have been suffered resulting from the operation of a nickel refinery in
that community by the Defendant. Specifically, the damages alleged were not human health effects
or soil contamination, but rather, that property values in Port Colborne had not appreciated as
quickly as in neighbouring, comparable communities.

This action was certified by the Ontario courts as a class action and proceeded to trial. Although the
class was largely successful at trial, the judgment in its favour was overturned by the Ontario Court
of Appeal in the fall of 2011, on a number of legal and factual bases. As I noted in my article in the
Winter 2011 edition of the McLennan Ross Legal Counsel, this action is of potentially great
significance to environmental class proceedings, given its restrictive application of the limitations
legislation (the laws that require a lawsuit to be started within a specified period of time after the
injured party becomes aware, or should have become aware, that they have a claim to advance – in
Alberta, generally two years). In brief, the lower Courts found that the limitation period only began
to run against the Class upon the publication by government authorities of health concerns
associated with nickel contamination. However, the Court of Appeal found that whether or not the
individual class members knew of the potential for a claim of property damages associated with
such risks, was an individual issue and could not proceed as a class action.

Alberta has also seen environmental issues addressed through class proceedings. In Paron v.
Alberta (Environmental Protection)
, the Court denied a certification application brought on behalf
of cottage owners of Wabamun Lake. The class action intended to seek damages and an injunction
for thermal pollution attributed to an electrical engineering plant operated near the lake, which
allegedly interfered with the cottage owners’ enjoyment and value of their properties. Another
Alberta action, Windsor v. Canadian Pacific Railway Ltd., was certified on behalf of a class of
landowners in the Ogden community of Calgary who claimed that contamination had flowed from
the Defendant’s operating site to the groundwater beneath their homes and commercial properties,
reducing their values.

The above are simply three examples of environmental issues which have led not only to litigation,
rather than (or in addition to) the intervention of the environmental regulators, but to a class
proceeding on behalf of a group of allegedly impacted landowners. In two of the three described
cases, certification was granted (although in the Inco decision, the Court of Appeal dramatically
restricted the scope of certification by classifying certain issues as not suitable for a class action).
Accordingly, there continues to be every reason to believe that the class action tool will be used by
environmental law practitioners on behalf of their clients, to advance claims that might not be
economic or feasible on an individual basis. Further, this provides a powerful tool to redress
environmental issues, where impacted land owners and others are not satisfied with the steps taken by the environmental regulatory authorities. Indeed, as I noted in my Spring 2009 article in Legal Counsel, the Supreme Court of Canada has held that compliance with environmental regulations and licencing does not necessarily preclude liability in damages to, for example, neighbouring landowners who are adversely affected by a company’s operations. Therefore, an operator may be exposed to civil lawsuits, including class actions, even where it has complied with all applicable environmental regulations and no regulatory enforcement is taking place.

By contrast, we do not see in Canada any significant development of class actions in the
occupational health and safety field. At first blush, this appears somewhat odd. Occupational health
and safety issues can similarly affect groups of claimants such as employees, and indeed can have
precisely the same effect on such groups of claimants, all of which would appear to be well suited to
the class proceeding mechanism. However, on further review it becomes clear that occupational
health and safety class proceedings in Canada are generally not feasible. This is primarily due to thepresence of workers’ compensation legislation in all provinces. Workers’ compensation legislation provides compensation to workers who are injured on the job, on a no-fault basis. However, the statutory trade-off for this compensation is that workers are generally not permitted to pursuelitigation against their employers in relation to those same injuries. For instance, although theAlberta legislation permits the Workers’ Compensation Board (“WCB”) to allow an injured worker
to sue third parties who are not covered by the Workers’ Compensation Act (“WCA”), such consent
is rarely granted. Where it is granted, the WCB can maintain significant control over the prosecution including the ability to direct counsel and to deny approval to any settlement.Furthermore, the WCB is entitled to bring that same action in the name of the worker without his or her consent. However, as with all administrative bodies, the WCB cannot exercise its powers unless there is a reasonable basis to do so. Thus, as Professor Garry Watson of Osgoode Law School noted, the existence of workers’ compensation legislation in Canada explains why Canada, unlike the United States, has not had asbestos litigation.

Professor Watson’s conclusion is illustrated by the recent Alberta decision of Stewart v. Enterprise
Universal Inc
., where the Defendant sought a summary dismissal of a class action lawsuit relating
to illness allegedly arising from asbestos exposure. The Defendant, Enterprise, had already pled
guilty to one count of violating Alberta’s Occupational Health and Safety Act. Enterprise was
successful in arguing that the action should be dismissed on the basis that workers’ compensation
legislation barred the Court action.

A further roadblock to occupational health and safety claims in Canada relates to the ability of the
Crown to protect itself from liability in the same manner as workers’ compensation legislative
schemes protect private employers. In this regard, proposed class proceedings have been denied
certification in Saskatchewan, Newfoundland and New Brunswick respecting persons alleged to
have been harmed by the spraying of defoliating chemical agents. One of the reasons specified by
the Newfoundland Court of Appeal for denying certification was that a majority of the proposed
class members were likely barred by federal legislation limiting the liability of the Crown, on the
similar basis to workers’ compensation statutes. Essentially, federal legislation insulated the federalCrown from any actions where pension or compensation had been paid in respect of the particular injury or damage. In the case of these “Agent Orange” injuries, the Canada Pension Act had provided for payments to service members in connection with injuries or diseases suffered arising out of, or directly connected with, military service. Interestingly, Professor Watson suggests in hisarticle that the existence of specific or “ad hoc” government compensation schemes may well be a response to the institution of class actions. In other words, government finance compensatory
packages (such as those resulting from Hepatitis C claims against the national blood banks system),may well be a response – or a preventative measure in relation – to class actions.

A potential avenue for civil liability may arise indirectly, through possible impacts on family
members, friends or close contacts of injured workers. As an example, if family members ofworkers suffering from asbestos-related illness were proven to have suffered illness themselves as a
result of such asbestos contamination, it would appear an open question at present in Canada as to
whether the employer could in that situation be found liable to the injured family members if they
brought a class action. Certainly, legislation such as the WCA would not appear to preclude such a
lawsuit from being launched, because the injured parties would not be “workers” as defined under
that legislation nor would their injuries appear to have arisen “in the course of employment”. It
remains to be seen whether such lawsuits will be brought in Canada and, if so, whether or not they
would be successful – it is expected that it would be very difficult in most cases to prove a causal
chain of connection between the asbestos contamination, the health of the workers, and the health of the family members bringing the litigation. In addition, the employer would presumably challenge
the certification of such an action on the basis that all injuries would have to be individually proven
and assessed. On the other hand, the costs of defending class actions, and the risk that such
aggregated claims pose to companies of even significant means, is such that even actions with
greater evidentiary hurdles to overcome must be taken very seriously.

In sum, while class actions appear to be the “wave of the future” in litigation generally, and in the
environmental regulatory field specifically, it would appear that in the context of occupational
health and safety injuries, those suffering damages will have to continue to have their losses
addressed through either workers’ compensation legislation or government compensation packages.It would not appear likely that Canada will see the proliferation of compensation claims over such issues as asbestos exposure as we have seen in the United States to date.

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