Cost Recovery Actions Under the Waste Management Act of British Columbia

Brent A. Meckling
Davis & Company
Vancouver, British Columbia
bmeckling@davis.ca

On April 1, 1997 the Province of British Columbia enacted sweeping changes to Part 4 of the Waste Management Act, R.S.B.C. 1996, c. 482 (Act). Part 4 of the Act now casts a wide net of liability over persons potentially liable to remediate contamination and creates a statutory cause of action not available at common law or in equity for the recovery of remediation costs. Landowners (or others) who incur costs in remediating their property are no longer limited to often problematic common law claims in negligence or nuisance and can now seek to recover remediation costs from a wide variety of defendants who are presumptively responsible for some if not all of those costs.

The Act is administered by "managers" from the Province's Ministry of Water, Lands and Air Protection (Ministry). On its face, the legislative setting for the "cost recovery action" establishes both procedural and substantive safeguards for defendants potentially subject to the draconian obligations imposed by the Act.

Division 2 of Part 4 establishes the requirements for a proper determination that a site is contaminated. Section 26.4 gives the manager the power to determine whether a site is a contaminated site and to determine the boundaries of such a site. The section sets out detailed steps that the manager must follow in making such a determination including the issuance of a preliminary determination to any persons he knows may be a "responsible person" if the site is finally determined to be a contaminated site. Managers must also provide such persons with an opportunity to comment on both a preliminary and final determination. Both a preliminary and final determination that property is a contaminated site may be appealed to the Environmental Appeal Board.

Division 3 of Part 4 deals with liability for remediation. It imposes an oppressive, retroactive responsibility for the remediation of such a site on a large number of persons, many of whom are in fact unlikely to have caused the contamination. The draconian consequences of this prima facie liability are to some extent alleviated by various opportunities which Division 3 and the related Contaminated Sites Regulation (B.C. Reg. 375/96) provide to those affected to reduce their responsibility.

The primary responsibility for remediation at a contaminated site is imposed by Section 26.5 on numerous persons such as the current owner or operator of the site and all previous owners or operators. The manager may order any responsible person to remediate a contaminated site. Section 26.6 refines that blanket liability somewhat, essentially by exempting persons who can prove that they did not cause or contribute to the contamination.

Sections 27.2 and 27.3 confer additional protection on persons prima facie responsible for remediation under section 26.5. Section 27.2 permits the manager to appoint an allocation panel to give an opinion on whether a person is a responsible person, whether it is a minor contributor, what any responsible person's contribution to the contamination is, and what share of remediation costs is attributable to that contamination. Under Section 27.3, the manager can determine that a person is only a minor contributor if the person demonstrates the necessary facts. In this event, the manager must determine the amount of remediation costs attributable to that person. Most importantly, that person is liable only for that amount in any subsequent cost recovery action.

All of the provisions dealing with responsible persons appear to manifest the legislative assumption that persons subject to the prima facie responsibility imposed by Division 3 have a right to seek a determination from the manager as to whether they are indeed responsible persons, whether they are exempt or whether they are minor contributors. None of the fact-specific determinations envisaged by these provisions can be made without significant input from the person affected. Notice by the manager of his preliminary and final determinations of a contaminated site to any person known to him who may be a responsible person is therefore critical to that person's ability to limit its exposure.

Section 27(4) of the Act creates the statutory cost recovery action. It provides that, subject to any minor contributor determination made by the manager, any person who incurs costs in carrying out remediation at a contaminated site may pursue in an action the reasonably incurred costs of remediation from one or more responsible persons in accordance with the principles of liability set out in Part 4.

Division 4 of Part 4 sets out various means by which the actual remediation of a contaminated site may be carried out. It contemplates the official confirmation of remediation by documents issued by the manager such as an approval in principle (which authorizes the proposed manner of remediation) and a certificate of compliance (which certifies that remediation has been satisfactorily completed).

To date, the preconditions to be met prior to commencing a cost recovery action have been directly addressed in only four decisions of the British Columbia Supreme Court (the primary trial court in the Province). As a cost recovery action has yet to proceed to trial in British Columbia, the precise ambit of the new cause of action and the impact of common law defences, which are preserved by the Act, has yet to be articulated. The four decisions have all been rendered on motions for summary judgment on essentially uncontested evidence prior to trial. What has emerged in those decisions is a divergence of opinion regarding the necessary level of participation of potential defendants in the Act's administrative process before a cost recovery action may proceed.

In Swamy v. Tham Demolition Ltd. [2000] B.C.J. No. 1734 (S.C.) (Swamy No. 1) the plaintiff sued numerous persons at common law and under the Act for allegedly having dumped contaminated soil on her property. Although the manager had stated in a letter to the plaintiff that her property was a contaminated site, he had made no final determination to that effect. The manager had prohibited the plaintiff from growing anything on part of her property and had required her to obtain a permit to move the soil. The plaintiff had not appealed either of those decisions to the Environmental Appeal Board and had not remediated the property. Hunter J. dismissed the plaintiff's application for summary judgment under Section 27 of the Act. He held that the court cannot entertain a cost recovery claim until the procedures under the Act have been exhausted. He emphasized that the manager must take certain steps in determining whether a site is contaminated and, in particular, that the manager must provide an opportunity for comment to certain persons.

Following Swamy No. 1, the plaintiff sought and obtained a determination from the manager that her property was a contaminated site and agreed to be a responsible person (as permitted by the Act). The manager did not notify the defendants of his determination, although the defendants did have actual notice through the plaintiff. In Swamy v. Tham Demolition Ltd. [2001] B.C.J. No. 721 (S.C.) (Swamy No. 2), Stromberg-Stein J. granted the defendants a declaration that these steps did not constitute compliance with the preconditions for a valid cost recovery action.

Stromberg-Stein J. held that a person who elects to proceed by way of a final determination must prove strict compliance by the manager with the procedural requirements under the Act. The plaintiff had pursued a flawed process by failing to have numerous issues determined "within the confines of the Waste Management Act by those with the knowledge and expertise to carry out the objectives and aims of the Act" (para. 24).

In No. 158 Seabright Holdings Ltd v. Imperial Oil Limited [2001] B.C.J. No. 1922 (S.C.) (Seabright) the plaintiffs obtained an approval in principle, completed remediation of their development site and then obtained a certificate of compliance from the manager (albeit without any input from or notice to the defendant oil companies, who were the former owners of the property). The plaintiffs then brought a cost recovery action for the costs of remediation of both their development site and, in addition, in relation to adjacent lands which had not yet been remediated.

The defendants applied to dismiss the plaintiffs' claim. The court granted the defendants' application with respect to the adjacent lands as remediation had not yet been completed and no contaminated site determination had been made. Clancy J., however, refused to dismiss the plaintiffs' claim in relation to the main development site on the basis that remediation was complete, the administrative process had been "exhausted," and the manager "must have" made a contaminated site determination pursuant to the Act. Clancy J. agreed that a finding that the main development site was a contaminated site under the Act was a precondition to the bringing of a cost recovery action, but that that precondition had been satisfied because the manager had issued an approval in principle and a certificate of compliance over the development site which led him to conclude that he ?must have? made such a determination.

Clancy J. held that the plaintiffs did not need to establish that the manager made a specific contaminated site determination following the detailed administrative process set out in the Act. In addition, he found that the defendants' inability to seek minor contributor status from a manager to limit their exposure in a cost recovery claim simply involved a consideration of factors which the court could address at trial when apportioning liability as provided for under the Act.

The fourth case, Workshop Holdings Ltd. v. CAE Machinery Ltd. [2001] B.C.J. No. 2179 (S.C.) (Workshop Holdings), was heard before but decided after Seabright. Ralph J. adopted the statutory interpretation developed in the Swamy decisions to dismiss the plaintiff's cost recovery action on a summary judgment application by the defendant. As in Seabright, the plaintiff in Workshop Holdings was a developer who had remediated its property solely on the basis of an approval in principle and a certificate of compliance. Likewise, the defendant had not been given any opportunity for input but had been informed of the developer's remediation only after it was finished.
In arriving at the opposite conclusion of Clancy J. in Seabright (on virtually identical facts), Ralph J. held that the preconditions to a cost recovery action include a determination by the manager that a site is contaminated, and in making that determination, the manager must do those things required by Section 26.4, including giving notice to any person known to the manager who may be a responsible person. Such a person, he found, is entitled to an opportunity to comment on a determination and to appeal the decision. In addition, if the action were permitted to continue, the defendant would have lost the opportunity to seek the appointment by the manager of an allocation panel and to request a determination that it was a minor contributor.

Appeals of the Swamy decisions were filed but to date have not proceeded. However, both the Seabright and Workshop Holdings decisions have been appealed and are scheduled to be heard together by the British Columbia Court of Appeal in April 2002. The appeals should resolve the question of whether plaintiffs must obtain specific determinations from a manager under a process which involves potential defendants (and triggers certain protections in their favor) or whether plaintiffs can avoid the mandatory language of the Act by obtaining official documents from the Ministry such as a certificate of compliance which may not be based on a contaminated site determination made by the manager following the detailed requirements of Section 26.4. Fundamentally, the Court of Appeal will have to determine whether the Legislature intended to permit cost recovery claims to proceed without the proper administrative grounding seemingly called for under Part 4 of the Act.