Friday, December 14, 2012

Supreme Court lets corporate polluter off the hook.


The Supreme Court of Canada recently released its decision in the case of  Newfoundland and Labrador v. AbitibiBowater Inc. (Q.C.C.A., May 18, 2010)(33797)

“A was involved in industrial activity in Newfoundland and Labrador (the “Province”). In a period of general financial distress, it ended its last operation there, filed for insolvency protection in the United States and obtained a stay of proceedings under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”). The Province subsequently issued five orders under the Environmental Protection Act, S.N.L. 2002, c. E-14.2, requiring A to submit remediation action plans for five industrial sites it had occupied, three of which had been expropriated by the Province, and to complete the remediation actions. The Province also brought a motion for a declaration that a claims procedure order issued under the CCAA in relation to A’s proposed reorganization did not bar the Province from enforcing the environmental protection orders. The Province argued that the environmental protection orders were not “claims” under the CCAA and therefore could not be stayed and subject to a claims procedure order. It further argued that Parliament lacked the constitutional competence under its power to make laws in relation to bankruptcy and insolvency to stay orders that were validly made in the exercise of a provincial power. A contested the motion, arguing that the orders were monetary in nature and hence fell within the definition of the word “claim” in the claims procedure order. The CCAA court dismissed the Province’s motion. The Court of Appeal denied the Province leave to appeal.”

The S.C.C. (7:2) dismissed the Province's appeal.

Justice Deschamps wrote as follows (at paras. 2-4, 61):

“Regulatory bodies may become involved in reorganization proceedings when they order the debtor to comply with statutory rules. As a matter of principle, reorganization does not amount to a licence to disregard rules. Yet there are circumstances in which valid and enforceable orders will be subject to an arrangement under the CCAA. One such circumstance is where a regulatory body makes an environmental order that explicitly asserts a monetary claim.

In other circumstances, it is less clear whether an order can be treated as a monetary claim. The appellant and a number of interveners posit that an order issued by an environmental body is not a claim under the CCAA if the order does not require the debtor to make a payment. I agree that not all orders issued by regulatory bodies are monetary in nature and thus provable claims in an insolvency proceeding, but some may be, even if the amounts involved are not quantified at the outset of the proceeding. In the environmental context, the CCAA court must determine whether there are sufficient facts indicating the existence of an environmental duty that will ripen into a financial liability owed to the regulatory body that issued the order. In such a case, the relevant question is not simply whether the body has formally exercised its power to claim a debt. A CCAA court does not assess claims — or orders — on the basis of form alone. If the order is not framed in monetary terms, the court must determine, in light of the factual matrix and the applicable statutory framework, whether it is a claim that will be subject to the claims process.

The case at bar concerns contamination that occurred, prior to the CCAA proceedings, on property that is largely no longer under the debtor’s possession and control. The CCAA court found on the facts of this case that the orders issued by Her Majesty the Queen in right of the Province of Newfoundland and Labrador (“Province”) were simply a first step towards remediating the contaminated property and asserting a claim for the resulting costs. In the words of the CCAA court, “the intended, practical and realistic effect of the EPA Orders was to establish a basis for the Province to recover amounts of money to be eventually used for the remediation of the properties in question” (2010 QCCS 1261, 68 C.B.R. (5th) 1, at para. 211). As a result, the CCAA court found that the orders were clearly monetary in nature. I see no error of law and no reason to interfere with this finding of fact. I would dismiss the appeal with costs.

... I prefer to take the approach generally taken for all contingent claims. In my view, the CCAA court is entitled to take all relevant facts into consideration in making the relevant determination. Under this approach, the contingency to be assessed in a case such as this is whether it is sufficiently certain that the regulatory body will perform remediation work and be in a position to assert a monetary claim."



The Chief Justice (in dissent) wrote as follows (at paras. 65, 96):

"Remediation orders made under a province’s environmental protection legislation impose ongoing regulatory obligations on the corporation required to clean up the pollution. They are not monetary claims. In narrow circumstances, specified by the CCAA, these ongoing regulatory obligations may be reduced to monetary claims, which can be compromised under CCAA proceedings. This occurs where a province has done the work, or where it is “sufficiently certain” that it will do the work. In these circumstances, the regulatory obligation would be extinguished and the province would have a monetary claim for the cost of remediation in the CCAA proceedings. Otherwise, the regulatory obligation survives the restructuring.…

First, I find myself unable to decide the case on what I think the CCAA judge would have done had he gotten the law right and considered the central question. In my view, his failure to consider that question requires this Court to answer it in his stead on the record before us: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 35. But more to the point, I see no objective facts that support, much less compel, the conclusion that it is “sufficiently certain” that the Province will move to itself remediate any or all of the pollution Abitibi caused. The mood of the regulator in issuing remediation orders, be it disinterested or otherwise, has no bearing on the likelihood that the Province will undertake such a massive project itself. The Province has options. It could, to be sure, opt to do the work. Or it could await the result of Abitibi’s restructuring and call on it to remediate once it resumed operations. It could even choose to leave the site contaminated. There is nothing in the record that makes the first option more probable than the others, much less establishes “sufficient certainty” that the Province will itself clean up the pollution, converting it to a debt."

Justice LeBel (also in dissent) wrote as follows (at para. 101):

"In my view, the CCAA court was concerned that the arrangement would fail if the Abitibi respondents (“Abitibi”) were not released from their regulatory obligations in respect of pollution. The CCAA court wanted to eliminate the uncertainty that would have clouded the reorganized corporations’ future. Moreover, its decision appears to have been driven by an opinion that the Province had acted in bad faith in its dealings with Abitibi both during and after the termination of its operations in the Province. I agree with the Chief Justice that there is no evidence that the Province intends to perform the remedial work itself. In the absence of any other evidence, an off-hand comment made in the legislature by a member of the government hardly satisfies the “sufficient certainty” test. Even if the evidentiary test proposed by my colleague Deschamps J. is applied, this Court can legitimately disregard the CCAA court’s finding as the Chief Justice proposes, since it did not rest on a sufficient factual foundation."

Regards,

Blair