Damages for injury to property to be based on restoration cost

Midwest Properties Ltd. v. Thordarson, 2015 ONCA 819:

[61]       At common law, the traditional view was that damages for any type of injury to property should be measured by the diminution in value caused by the injury: see Hosking v. Phillips (1848), 154 E.R. 801, 3 Exch. Rep. 168 (Eng. Ex. Ct.). More recently, courts have awarded damages based on restoration costs, even if those costs exceed the amount of the decrease in property value: see Katherine M. van Rensburg, "Deconstructing Tridan: A Litigator's Perspective" (2004) 15 J. Envtl. L. & Prac. 85, at p. 89; see e.g. Jens v. Mannix Co. (1978), 89 D.L.R. (3d) 351 (B.C.S.C.); Horne v. New Glasgow, [1954] 1 D.L.R. 832 (N.S.S.C.). 

[62]       The restoration approach is superior, from an environmental perspective, to the diminution in value approach. Since the cost of restoration may exceed the value of the property, an award based on diminution of value may not adequately fund clean-up: Bruce Pardy, Environmental Law: A Guide to Concepts (Markham, ON: Butterworths, 1996), at p. 223.

[63]       In its Report on Damages for Environmental Harm, the Ontario Law Reform Commission canvassed a number of methods for calculating damages. Ultimately, it recommended the adoption of methodologies, like the restoration approach, that "best ensure that the environment is returned to its pre-contaminated condition": Ontario Law Reform Commission, Report on Damages for Environmental Harm (Toronto: Ontario Law Reform Commission, 1990), at p. 56. The Commission concluded, at p. 55, that "the ultimate goal of the courts should be to ensure that the environment is put in the same position after the mishap as it was before the injury."

[64]       Two relatively recent cases reflect the trend toward awarding remediation damages. In Tridan Developments Ltd. v. Shell Canada Products Ltd. (2000), 35 R.P.R. (3d) 141 (S.C.), aff'd (2002), 57 O.R. (3d) 503 (C.A.), leave to appeal refused, 177 O.A.C. 399 (note), a property neighbouring a gas station was contaminated with gasoline after a leak in a fuel line. Since the defendant polluter admitted liability, the only issue at trial was the assessment of damages. The plaintiff sought to recover the cost of returning its property to "pristine" condition. It also claimed "stigma" damages measured as the diminution in the value of its property. The defendant argued that the plaintiff had suffered no damages due to the spill, or that alternatively, its damages should be limited to the cost of remediating the property to the MOE's minimum standards. The trial judge awarded damages as requested by the plaintiff. On appeal, this court overturned the stigma damage award but upheld the trial judge's decision to order damages for the cost of future remediation.

[65]       The respondents argue Tridan does not apply because the defendant in that case admitted it was liable. There is no merit in this argument. The damages analysis in Tridan is relevant regardless of whether liability was admitted or found by the court.

[66]       The second case is Canadian Tire Real Estate Ltd. v. Huron Concrete Supply Ltd., 2014 ONSC 288, 88 C.E.L.R. (3d) 93. It also involved PHC contamination by a neighbour. Justice Leitch ordered the defendant to pay $3.6 million, which was the estimated cost for future remediation, as damages for nuisance, negligence, trespass and strict liability. She found that this award would place the plaintiff in the position it was in prior to the tortious conduct.

[67]       Neither Tridan nor Canadian Tire involved a claim under s. 99(2) of the EPA. There is no reported case where a court has awarded damages for the cost of future remediation under this section. Nonetheless, in my view, awarding damages under s. 99(2) based on restoration cost rather than diminution in property value is more consistent with the objectives of environmental protection and remediation that underlie this provision.

[68]       This approach to damages reflects the "polluter pays" principle, which provides that whenever possible, the party that causes pollution should pay for remediation, compensation, and prevention: see Pardy, at p. 187. As the Supreme Court has noted, the polluter pays principle "has become firmly entrenched in environmental law in Canada": Imperial Oil Ltd. v. Quebec (Minister of the Environment), 2003 SCC 58, [2003] 2 S.C.R. 624, at para. 23. In imposing strict liability on polluters by focusing on only the issues of who owns and controls the pollutant, Part X of the EPA, which includes s. 99(2), is effectively a statutory codification of this principle.

Of the Law Societies of Upper Canada and Nunavut