Canada: The Marine Liability Act And The "Polluter Pay" Regime: A Review Of The Court's Decision In British Columbia v. The Administrator Of The Ship-Source Oil Pollution Fund, 2019 BCCA 232

Last Updated: August 29 2019
Article by Chantal DeSereville

Earlier this summer, the British Columbia Court of Appeal dismissed an appeal by the Province of British Columbia concerning the Province's liability for oil pollution under the federal Marine Liability Act, S.C. 2001, c.6. The pollution in question had emanated from a derelict vessel of which the Province had become the unwilling owner due to the dissolution of the vessel's corporate owner. While the Court of Appeal recognized that the Province had not caused the pollution, the Court concluded that the Province was nevertheless liable for the pollution as the owner of the vessel under the Marine Liability Act. At the core of the Court's reasons was a finding that the relevant provisions of the Marine Liability Act do not create a "polluter pay" regime, unlike many other environmental protection statutes in Canada. Below is a review of the Court of Appeal's decision.

Background

The Chilcotin Princess was a 570-tonne motor vessel built in 1945 (the "Vessel“). The Vessel fell into disrepair and for many years remained moored and unmaintained at a dock in Namu, British Columbia. In 2014, the corporate owner of the Vessel, Inter Coast Towing Ltd. ("Inter Coast"), dissolved for failing to file annual returns. The Vessel consequently vested in the Province pursuant to s. 344(2) of the British Columbia Business Corporations Act, SBC 2002, c 57.

In 2014, the Province and the Canadian Coast Guard became concerned about the potential for oil pollution from the Vessel, which appeared to be sinking. In 2015, the Coast Guard took steps to decommission, tow, disassemble, and remove all accessible hydrocarbons from the Vessel. The Coast Guard subsequently made a claim of $137,680.88, plus interest, to the Administrator of the Ship-source Oil Pollution Fund (the "Administrator") pursuant to ss.101 and 103 of the Marine Liability Act, for the cost of decommissioning and removing oil from the Vessel.

The Administrator paid the Coast Guard's claim and became subrogated to the rights of the Coast Guard pursuant to s. 106(3)(b) of the Marine Liability Act. The Administrator then presented its claim to the Province pursuant to s. 106.3(6) of the Marine Liability Act, which allows the Administrator to recover the cost of clean-up from the owner of the Vessel. When the Province refused to pay the claim, the Administrator commenced an action against the Province in the Federal Court.

The Province subsequently brought a petition to the Supreme Court of British Columbia seeking to have Inter Coast restored "with prejudice" to any claims that had arisen during the period of Inter Coast's dissolution. The Province argued that it had no obligation under the Business Corporations Act to expend resources on assets which vest in it as a result of the dissolution of a company. The Province also argued that the Marine Liability Act was intended to make the polluter pay and restoration should be ordered on conditions that would have that effect. The Supreme Court rejected the Province's arguments and restored Inter Coast "without prejudice" to the Administrator's claim against the Province. The Province appealed.

Reasoning of the Court of Appeal

The Court of Appeal dismissed the Province's appeal, finding that s.360(7) of the British Columbia Business Corporations Act presumes that corporations will be restored “without prejudice” to those rights acquired between dissolution and restoration. According to the Court, the purpose of the restoration provisions of the Business Corporation Act is not only to facilitate the imposition of liabilities on dissolved corporations, but to preserve the legitimate claims of third parties that arise during the dissolution period.

The Court of Appeal also rejected the Province's submission that the Marine Liability Act contemplates a "polluter pay" approach to environmental protection. According to the Court, the plain wording of the Act imposes liability for the cost of preventative measures on the owner at the time the preventative measures are taken. The Court reasoned that while the Marine Liability Act imposes liability upon persons whose fault or neglect cause death, personal injury or property damage (Parts 1 and 2 of the Act), the liability for the expense of preventing or minimizing pollution damage is not described in relation to fault or neglect. The Court noted that section 77 of the Marine Liability Act expressly provides that owners of vessels are responsible for clean-up costs in the absence of fault or negligence:

(3) The owner's liability under subsections (1) and (2) does not depend on proof of fault or negligence, but the owner is not liable under those subsections if they establish that the occurrence
(a) resulted from an act of war, hostilities, civil war or insurrection or from a natural phenomenon of an exceptional, inevitable and irresistible character;
(b) was wholly caused by an act or omission of a third party with intent to cause damage; or
(c) was wholly caused by the negligence or other wrongful act of any government or other authority that is responsible for the maintenance of lights or other navigational aids, in the exercise of that function.

The Court concluded that the imposition of liability on the owner of the vessel at the time clean up expenses are incurred is consistent with the Marine Liability Act's objective of preventing and minimizing oil pollution damage.

The Court's Interpretation of the Marine Liability Act as Compared to the Polluter Pay Regime under the Ontario Environmental Protection Act

The B.C. Court of Appeal's decision stands in contrast to the Ontario Courts' interpretation of the civil liability provisions of the Ontario Environmental Protection Act, RSO 1990, c E.19 ("EPA"). In Midwest Properties Ltd. v. Thordarson, 2015 ONCA 819, for instance, the Ontario Court of Appeal emphasized that Part X of Ontario EPA, which creates a private law cause of action for damages incurred as a result of a spill of a pollutant, is a codification of the principle that wherever possible, the party that causes the pollution should pay for remediation, compensation and prevention.

The Ontario case law also recognizes that a property owner will not always be legally responsible for pollution emanating from their property, even if the person owned the property at the time of the pollution. For instance, in Technical Standards and Safety Authority v Kawartha Lakes (City), 2016 CanLII 41685 (ON ERT) ("TSSA v. Kawartha Lakes"), the Environmental Review Tribunal ("ERT" or "Tribunal") refused to uphold an order under s.100.1 of the EPA against the owner of a property that had leaked furnace oil. Section 100.1 allows municipalities to issue orders against owners of a pollutant to pay to the municipality any reasonable costs or expenses incurred by the municipality in cleaning up a spill. In TSSA v. Kawartha Lakes, the appellant property owner, although a co-owner at the time of the spill, never resided at the property or had charge, management or control of the furnace oil at any time. The Tribunal found that the appellant owner had no connection to the oil at all and, as such, could not be "the owner of the pollutant or the person having control of the pollutant" as required for orders under s.100.1.

Nevertheless, many provisions in the EPA have wording that is inconsistent with the "polluter pay" principle. Section 18 and 157.1 orders, for instance, are "no-fault" orders, meaning that they can be issued against any of the persons contemplated by that section, regardless of their fault or responsibility for the contamination. In Kawartha Lakes (City) v. Ontario (Director, Ministry of the Environment), [2009] O.E.R.T.D. No 59 ("Kawartha Lakes"), the Environmental Review Tribunal upheld a s.157.1 order against the City of Kawartha Lakes requiring it to clean up municipally owned land that had been contaminated by a neighbour's oil spill, despite the City being entirely free of fault for the spill. In reaching its decision, the Tribunal found that the issue of fault should not override the environmental protection objectives of the EPA.

Generally

The B.C. Court of Appeal's decision highlights a strict liability approach to Canadian environmental protection law. It also serves as a cautionary tale of the potential risks faced by inadvertent acquirers of contaminated or polluted property.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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