“DESPERATELY SEEKING STIGMA” – Stigma Damages Not Recoverable As Remediation Costs Pursuant to EMA

26. November 2019 0

What types of damages can you claim as remediation costs under the Environmental Management Act?  The answer to that question became a little bit clearer with the release of the B.C. Supreme Court’s decision in Jansen Industries 2010 Ltd. v. Victory Motors (Abbotsford) Ltd. 2019 BCSC 1621.  In it, the Court ruled that stigma damages – or the diminution in the market value of an asset because of some real or perceived defect in that asset caused by a defendant’s wrongful act – are not recoverable as remediation costs under the EMA, with such a claim instead having to be pursued via a tort action.

In Jansen, sites that were owned by the plaintiffs, Jansen Industries and Victory Motors, were determined to be contaminated, with the contamination having originated on Victory Motors’ land.  The plaintiffs had entered into a B.C. Ferries agreement with the property’s prior owners, Chevron and Shell, releasing them from all claims.  In the result, Jansen Industries brought an action seeking remediation costs from both Victory Motors and Actton Super‑Save Gas Stations pursuant to the EMA along with damages for nuisance under the principle of Rylands v. Fletcher.  Victory Motors similarly commenced an action seeking to recover its remediation costs from Super‑Save Gas under the EMA.

Ultimately, both actions were allowed in part, with the Court holding that the plaintiffs’ properties did indeed qualify as contaminated sites under section 39 of the EMA, that Super‑Save Gas was a responsible person under section 45, and that reasonable costs were incurred in order to remediate the properties, which included $395,706 in retaining an engineering company to obtain certificates of compliance.  However, Victory Motors had failed to establish that they were also entitled to the costs of having removed a remaining underground storage tank on the basis that there was no reasonable possibility that it was a continuing source of contamination.

Interestingly, along with their remediation costs, the plaintiffs in this case also attempted to pursue stigma damages, which are the diminution in market value of an asset due to a real or perceived defect that is caused by a defendant’s wrongful act.  However, the Court held that stigma damages were not recoverable as remediation costs pursuant to the EMA.  On this issue, the Court held beginning at paragraph 89:

[89]        I agree with Super‑Save that stigma damages are not recoverable as remediation costs pursuant to the EMA. The EMA is concerned with the costs of bringing sites into a state of compliance with the standards set out in the EMA and the CSR.

[90]        Section 53 of the EMA authorizes the Director to issue a Certificate of Compliance if satisfied that a contaminated site has been remediated…

[91]        It seems to me that the purpose of a Certificate of Compliance is to certify that the site has been remediated to the point that the director considers it to be adequate for the specific uses set out in the Certificate of Compliance.  I take this to mean that it is only the costs of bringing a site into compliance that are properly recoverable pursuant to the EMA.

The Court went on to conclude that a property may continue to contain contaminants but nevertheless be in compliance with the requirements of the EMA, as was the case here.  Therefore, if an owner wished to remediate to a condition beyond that approved by the director, the appropriate avenue through which to do so would be an action in tort; the success of which would depend on the plaintiff proving that they suffered a diminution of value of their property because they (or subsequent owners of their properties) are or would be precluded from making optimal use of their properties as a result of the defendant’s wrongful conduct.

Therefore, the Jansen decision makes clear that stigma damages are not recoverable as remediation costs pursuant to the EMA, with an action in tort instead being the appropriate avenue through which to pursue the recovery of such damages.  This serves as an interesting and useful practice point for all owners and developers of contaminated sites.

 

Want more useful updates on recent decisions? Contact Andrew Tang at atang@harpergrey.com or anyone else from our team listed on the Authors page.

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