On December 6, 2019, the Supreme Court of
Canada released its decision in R. v
Resolute FP Canada Inc, 2019 SCC 60. In a 4-3 decision, the Supreme Court
overturned the Ontario Court of Appeal’s decision, with the majority finding
that a contractual indemnity was limited to pollution claims advanced by third
parties and could not be relied upon by a “first party” in the face of an order
for remediation from the provincial authority.
Background
In 1977, Grassy Narrows and Islington
First Nations began litigation arising from the discharge of mercury into a local
river system. The source of the mercury was a pulp and paper mill located in
Dryden, Ontario (the “Mill”).
Prior to resolution of the litigation,
Great Lakes Forest Products Limited (“Great
Lakes”) expressed interest in purchasing the Mill but was concerned about
the outstanding litigation. To alleviate these concerns the Government of
Ontario granted indemnities to Great Lakes in 1979 and 1982 as against costs
and damages arising out of the Mill’s past pollution.
In 1985, the litigation settled. As part
of the resulting settlement agreement, the Government of Ontario entered into a
new indemnity with Great Lakes and
its predecessor, Reed Ltd. (the “Indemnity”),
that replaced the earlier indemnity agreements between the parties.
On August 25, 2011, the Ontario Ministry
of the Environment and Climate Change issued a remediation order requiring the
maintenance, monitoring and testing of a mercury waste disposal site at the
Mill (the “Order”). The Order was
issued to both Great Lakes’ successor, Resolute FP Canada Inc. and Weyerhaeuser
Company Limited, who had previously owned the waste disposal site.
Resolute and Weyerhaeuser (collectively,
the “Defendants”) sought a
declaration that the Indemnity applied to the waste disposal site, and as such
the Government of Ontario (the “Government”)
was required to compensate the Defendants for the costs of complying with the
Order.
Decisions of the Lower
Courts
The motion judge concluded that the
Indemnity covered the costs of the Defendants complying with the Order and
granted Summary Judgment. While the Indemnity only applied to defined
‘pollution claims’, the motion judge found the language of the Indemnity clear
and unambiguous; the meaning of ‘pollution claims’ encompassed first party
claims.
The majority of the Ontario Court of
Appeal upheld the motion judge’s conclusion, agreeing that the Indemnity could
apply to first party claims. In his dissent at the Court of Appeal, Justice
Laskin found that the motion judge significantly erred in both fact and law by
concluding that the Indemnity covered first party claims. Absent these errors,
Laskin determined that the Indemnity was only to cover pollution claims brought
by third parties.
Supreme Court Decision
In a 4-3 majority, the Supreme Court held
that the Indemnity did not apply to the Order and that the Defendants were responsible
for the costs of complying. The Court substantially relied upon and agreed with
Laskin’s dissent, finding that the motion judge made palpable and overriding
errors when interpreting the Indemnity. Ultimately, both Laskin and the majority
of the Supreme Court focused on the following errors made by the motion judge
in his interpretation of the Indemnity:
1. The motion judge erred in
concluding the waste disposal site is a source of ongoing mercury pollution and
therefore may give rise to a pollution claim. Rather, the waste disposal site
was created as a solution to the mercury pollution and there was no evidence
before the courts of mercury being discharged from the site. Thus, the costs
associated with the waste disposal site were not pollution claims, as defined
in the Indemnity.
2. The motion judge failed to
consider the broader factual matrix and context that gave rise to the
Indemnity. The Indemnity at issue was originally a schedule to the 1985
settlement agreement, thus its scope was limited to only the issues considered
and defined in that agreement. The scope did not include the ‘mere presence’ of
mercury at the waste disposal site, but rather only covered claims for new
mercury discharge or the ongoing presence of mercury resulting from prior
discharge. Additionally, the motion judge relied on the language of the two
prior indemnity agreements between the parties to read commitments into the
Indemnity that no longer exist between the parties.
3. The motion judge fixated on the
language of the Indemnity’s first paragraph rather than considering the
Indemnity as a whole. The second paragraph of the Indemnity requires that the
Government be given notice of any pollution claim such that the Government
could carry or participate in the litigation. Additionally, under the third
paragraph, the parties of the Indemnity must cooperate in the investigation of
any pollution claim. Laskin concluded, and the Supreme Court agreed, that these
paragraphs would be meaningless and inconsistently applied if the Indemnity
covers first party claims.
Take Away
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