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CN Rail vs. A.B.C. Recycling

A recent decision of the British Columbia Supreme Court has provided some useful guidance with respect to the costs associated with remediation work and, specifically, the types of remedial costs that...


A recent decision of the British Columbia Supreme Court has provided some useful guidance with respect to the costs associated with remediation work and, specifically, the types of remedial costs that can be recovered in the context of an action. While the decision specifically addresses this issue in the context of the Environmental Management Act in B.C., the court’s commentary will be instructive to other courts across Canada. The decision should be of interest to waste management facility operators, as the case involved a recycling facility.

The action was commenced by Canadian National Railway Company (CN) against A.B.C. Recycling Ltd. (ABC). ABC operated a scrap metal recycling operation adjacent to lands owned by CN. CN wanted to develop its lands for sale, but determined that ABC’s operations had spilled over onto the CN lands. Apparently, the border between the two properties was not physically defined, and ABC had inadvertently placed recycled and other materials from its operations on the CN lands.

CN representatives met with ABC representatives and expressed concern with respect to trespass, and ABC agreed to remove the materials. Between 1998 and 2000, ABC removed the materials that had spilled over from their scrap yard operations onto the CN lands, and also removed contaminated soil, relocating the soil onto ABC’s property. ABC also conducted confirmatory sampling of the CN lands to determine whether all of the metal and debris had been properly removed; this sampling indicated that the remediation met the Community Land Use Standards, as established by the Ministry of Water, Land and Air Protection .

In the meantime, CN retained its own environmental consultant in conjunction with its proposed sale. CN wanted to be in a position to assure a prospective purchaser that the CN lands were clean and, on this basis, CN’s consultant recommended preparation of a site profile. A site profile is an environmental disclosure statement required by the ministry.

The CN/ABC property boundary was identified as an area of concern by CN’s consultant such that further investigative work was required. During the course of this work, additional contamination was identified in the area previously remediated by ABC. In June 2001, CN informed ABC of the contamination. CN also advised ABC that it had entered into an agreement to sell its property contiguous with the ABC property and that, as such, CN needed to ensure timely remediation.

The remediation dispute

About a month later, ABC wrote to CN, outlining its proposal for remediation of the CN lands that had been contaminated by ABC. ABC proposed to recover material from the CN lands and then install a groundwater barrier on ABC’s property along the property line.

CN took the position that it was frustrated with ABC due to delay, and that there was concern regarding the quality of environmental remedial work being carried out by ABC given the discovery of contamination in an area that was, according to ABC, previously remediated. CN was of the view that the remedial work needed to be conducted in a manner such that there was no question from the ministry regarding the level of cleanup, and whether or not it met ministry requirements.

Nevertheless, by August 2001, CN and ABC had agreed that ABC would act as the remediation contractor using ABC employees and equipment, with CN’s environmental consultant collecting confirmatory samples to ensure compliance with ministry requirements.

Remedial efforts were slow and delayed several times. Eventually CN took over the remedial work, completing it within seven to ten days (including installation of the groundwater barrier liner on the property boundary). CN’s environmental consultant confirmed remediation of the property and established flow direction.

CN demanded payment of all remediation costs, including costs for the environmental consultants CN retained, the environmental contractor that carried out the remedial work, and legal fees. When payment was not received, CN commenced an action to recover these costs.

What costs are “reasonable”?

In determining the appropriate amount of compensation, the court referenced the Environmental Management Act, which provides that a person responsible for remediation is liable for “reasonably incurred costs of remediation.”

CN argued that it was not required to prove that the costs incurred were “reasonable,” but only that they were associated with remediation. The court disagreed, referring to the wording in the statute. The court also held that the determination of “reasonably incurred costs of remediation” requires an objective analysis of the costs in the particular circumstances of the case. However, it does not mean that all costs of remediation are recoverable since the legislature could have said this, if that was intended.

Both CN and ABC adopted the definition of “reasonable” from Black’s Law Dictionary as being “fair, proper, just, moderate, suitable under the circumstances, fit and appropriate to the end in view, etc.” However, ABC argued that CN’s costs were excessive and that the remedial work could have been completed for much less. The court considered the costs incurred by CN, and held that CN was entitled to take a careful approach. In the end, the court awarded CN almost of its costs including its legal costs, less the amount CN incurred by failing to pay some of its consultants on time.

Rosalind Cooper, LL.B. is a partner with Fasken Martineau DuMoulin LLP, with offices across Canada. Ms. Cooper is based in Toronto, Ontario. E-mail Rosalind at rcooper@tor.fasken.com


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