In a decision that continues Ontario’s trend of imposing liability on individuals for contamination at properties owned by companies, the Environmental Review Tribunal has upheld orders by the Ministry of the Environment and Climate Change requiring preventative measures to be taken by an individual who was an adviser and mortgagee to companies that owned and operated from the contaminated site.

The issue of personal liability for contamination of corporate sites under Ministry order has been one of mounting concern for directors and officers of companies in Ontario. The basis of that liability is the management and control that the directors and officers are said to exert over the corporate property.

This case shows that the Tribunal is willing to look at the substance of management and control rather than the superficial form of the individual’s relationship with the company.

The decision merits a more detailed analysis, which we will provide in a later article, but we content ourselves here with providing the following brief overview.

Overview

The Tribunal issued its decision and reasons in Rocha v. Ontario (Environment and Climate Change) ERT Case No.: 14-043 on July 17, 2015.

Alberto Rocha appealed two orders made by the Ministry of the Environment and Climate Change (Ministry) under s. 157.1(1) of the Environmental Protection Act (EPA) that required the taking of preventative measures regarding contaminated groundwater, including monitoring, recording and reporting on the contamination to delineate a plume of contamination and to contain it on-site, but not remediation. The Tribunal found as follows.

The primary contaminants of concern were identified as trichloroethylene (TCE), a degreasing solvent that cleans metal and is used in the business of chrome plating, and vinyl chloride, a breakdown product of TCE. They are human carcinogens and volatile organic compounds (VOCs).

The property in question is situated at 520 Speers Road, Oakville in the Regional Municipality of Halton. That property has been owned by Autochrome Limited since 1964 and Precision Platers Ltd. carried on a chrome plating business there from 1964 to early 2010. Manuel Machado is now the sole principal of these companies. He presently carries on business at the property as M.M. Euro Polish.

The orders were made against Mr. Rocha as a person alleged to have management or control of an undertaking or property in respect of the contamination within the meaning of the EPA.

In addition to his work for the companies, Mr. Rocha works for Cancer Care Ontario, and operates a small accounting practice and a private mortgage business. His relationship with the companies began in the 1990s when he acted as the account manager for Autochrome and Precision Platers while he was at the accounting firm PriceWaterhouseCooper.

In 2002, after he had left the accounting firm, he was asked by Mr. Machado to provide advice on his purchase of an interest in Autochrome. Mr. Rocha provided this advice and was subsequently retained by the companies to assist in preparing their financial statements and to provide accounting and other advice on a regular basis. Over time, he took on more responsibilities, including being the contact person with the Ministry, neighbours and environmental consultants, and dealing with environment issues associated with the companies and the property.

Mr. Rocha provided funding for the property, which was ultimately restructured into a mortgage held by TD Canada Trust Company as trustee for him and his wife of their self-directed retirement savings plans. His witness statement acknowledged that he was not a direct mortgagee of the property and did not have independent control over the mortgage and the payments thereunder.

The property is located in an area of mixed residential, industrial and commercial uses. The existence of contamination in, on or under the property and a plume of groundwater contamination in the immediate vicinity of the property were not at issue in the appeal proceedings, although the parties did not agree upon the source of the contamination and the plume. The plume of groundwater contamination includes the adjacent lands to the west and a residential area to the south of the property.

While drinking water in the area is supplied by the municipality, the Ministry was concerned that the VOCs from the contaminated plume of groundwater could enter building spaces on neighbouring properties through sumps or cracks in basement foundations.

The Ministry argued that the orders should be upheld because the totality of the evidence showed that the appellant’s actions went beyond those of a mere adviser, representative, interpreter and lender/investor, and that his work for the companies and his involvement in decision-making, in combination with his financial role, demonstrated his management or control of an undertaking or property. The Ministry further argued that the provisions of s. 168.17 of the EPA, which exclude certain activities by a secured creditor from the definition of management and control, do not protect the appellant’s actions from such a finding.

Mr. Rocha argued that he has been a mere adviser, representative for the companies and their principals, and an interpreter for Mr. Machado, and that if the orders were upheld this will have a chilling effect on persons dealing with contaminated sites across the province. Regarding his role as a lender/investor, Mr. Rocha argued that he is a secured creditor and that his actions do not demonstrate management or control under s. 157.1(1) and that, in any event, he is protected by the provisions of s. 168.17 of the EPA.

The Tribunal disagreed with Mr. Rocha and upheld the Ministry’s orders. The Tribunal found that Mr. Rocha was a person with management or control of an undertaking or property and that the requirements in the orders are both necessary and advisable within the meaning of s. 157.1(1) of the EPA.

The Tribunal also found that Mr. Rocha was not a secured creditor or a secured creditor representative under s. 168.17 of the EPA and that, even if he were, his actions were not, for that reason alone, protected from a finding of management or control of an undertaking or property for the purpose of s. 157.1(1).

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Manning Environmental Law is a Canadian law firm based in Toronto, Ontario. Our practice is focussed on environmental law, energy law and aboriginal law. 

Paul Manning is a certified specialist in environmental law. He has been named as one of Canada’s leading Environmental Lawyers by Who’s Who Legal: Canada and ranked by Lexpert as one of Canada’s Leading Energy Lawyers.